Employee Benefits Compliance, Penalties, Taxes, Fees & Penalties

UPDATED: Penalties Under Employer Shared Responsibility

By Lisa Klinger, J.D., & Susan Grassli, J.D.

This article has been replaced with an updated and revised version, posted on May 25, 2016.  The original penalty amounts of $2,000 and $3,000 annually are indexed for inflation and in 2016 are $2,160 and $3,240  (2015 amounts were $2,080 and $3,120).   The examples in the article have been revised to reflect the indexed penalty amounts.

The opening paragraph of this article was (and is):

There are two possible penalties under the Employer Shared Responsibility (ESR) provisions:   the IRC section 4980H(a) penalty and the 4980H(b) penalty.  Neither  penalty applies unless at least one full-time employee purchases health insurance in a Health Insurance Marketplace (originally called an Exchange) and qualifies for a subsidy (a cost-sharing reduction and/or a premium tax credit).  An employer can be subject to only one penalty, not to both of them, and the 4980H(b) penalty cannot be greater than the amount of the 4980H(a) penalty if it applied. The two types of penalties are: