In Rev.Proc. 2025-2026, the Internal Revenue Service (IRS) announced inflation adjustment increases in the Affordable Care Act employer mandate penalties. The penalties are based on whether an applicable large employer (ALE) fails to offer affordable health insurance to at least 95 percent of its full-time employees and at least one of those employees receives a premium tax credit to buy individual health insurance. An ALE is an employer with 50 or more full-time equivalent employees. Affordability is measured by employee contributions to the cost of their employer-provided health care—penalties attach if those contributions exceed maximum percentages of their compensation.
In 2026, the penalty for an ALE failing to offer ACA-compliant health insurance will go to $3,340 per employee after the first 30 employees, up from $2,900 in 2025. The penalty for offering health insurance that is not affordable (as defined by the ACA as a percentage of compensation; in 2025 that would be 9.96 percent) will go up to $5,010 from the 2025 level of $4,350 for each individual who is contributing more than the maximum amount allowed and who is receiving a premium tax credit to purchase individual health insurance..
Prospects: These penalty adjustments are required by the ACA and are unlikely to be changed, either by legislation or regulation, at least for 2026.
NAIFA Staff Contacts: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.