Under Section 4980H of the Internal Revenue Code, Applicable Large Employers (ALEs) with 50 or more full-time and full-time equivalent employees must offer affordable, minimum value health coverage to at least 95% of their full-time workforce. Employers who fail to meet these requirements may face penalties known as employer shared responsibility payments.
The 4980H(a) penalty applies when an ALE fails to offer minimum essential coverage to at least 95% of full-time employees. It is calculated on all full-time employees minus 30. The 4980H(b) penalty applies when coverage is offered but is either unaffordable or does not meet minimum value, and is assessed only for employees who receive a Premium Tax Credit through the marketplace.
For the 2026 tax year, the 4980H(a) penalty is $3,340 per full-time employee annually ($278.33 per month), and the 4980H(b) penalty is $5,010 per applicable employee annually ($417.50 per month). These amounts are adjusted annually for inflation by the IRS.
An ALE is an employer that had an average of at least 50 full-time employees, including full-time equivalents, during the prior calendar year. Full-time equivalents are calculated by dividing total part-time employee hours by 120. Employers under common ownership must combine their employee counts across all entities.
ALEs are required to file Form 1094-C (transmittal) and Form 1095-C (one per full-time employee) annually with the IRS. These forms report information about the health coverage offered to employees. Use our ACA Filing Survey to determine your specific filing requirements.
To avoid ACA penalties, ensure you offer affordable, minimum value health coverage to at least 95% of your full-time employees, and file your 1094-C and 1095-C forms with the IRS on time. BoomTax is an IRS-authorized e-file provider that makes ACA filing fast and affordable, starting at $349.