Employee Benefits Compliance, Employer Mandate, Reporting & Disclosure

2021 ACA Employer Mandate Penalty Amounts & Draft Reporting Forms Released

Ahead of the 2020 reporting deadline, due March 2, 2021, for the 2020 plan year, the Internal Revenue Service (IRS) released new Questions and Answers (Q&A) guidance showing the 2021 indexed amounts for applicable Employer Shared Responsibility Provision of the Affordable Care Act (ACA) (a.k.a. “Employer Mandate”).

Q&A #40 confirms previously announced 2021 affordability percentage of 9.83%, up from 9.78% for plan years beginning in 2020.

Q&A #55 lists the 2021 indexed annual ACA employer mandate amounts for 4980H(a) and (b) penalties.

Employer Mandate Penalty A (Failure to Offer Minimum Essential Coverage)

2021 2020
$2,700 $2,570

Penalty B (Offer was Unaffordable)

2021 2020
$4,060 $3,860

Draft 2020 ACA Information Reporting Forms Released

The IRS released draft versions of the 2020 ACA reporting forms used to report health coverage and offers to the IRS and employees and/or plan participants.

Forms 1094/95B
Filed by insurance carriers and some self-funded plan sponsors of small plans

Forms 1094/95C
Filed by Applicable Large Employers to show ACA Employer Mandate compliance

Changes to the 2020 iteration of the reporting form include the addition of the Individual Coverage Health Reimbursement Arrangements (ICHRA) and related information.

Action May Be Required

Employers sponsoring health coverage, especially those for whom the employer mandate is applicable, are encouraged to read the updated Q&As. The ACA indexed amounts released will not require immediate action other than to continue planning for the 2021 affordability percentages where the safe harbor rule is used to determine affordability of the coverage offered. Penalty amounts will only apply where no offer of affordable coverage was made and the employee received a subsidy to obtain coverage through the Exchange. Employers facing challenges in determining affordability due to many employment changes related to COVID-19 should plan early for reporting.

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