Affordable Care Act Penalties and Excise Taxes

The Affordable Care Act (ACA) includes numerous reforms for group health plans and creates new compliance obligations for employers and health plan sponsors. The ACA, for example, requires health plans to eliminate pre-existing condition exclusions and provide coverage for preventive care services without cost-sharing. Some of the reforms for health plans apply to all health plans, while others apply only to non-grandfathered plans or to insured plans in the small group market.

Starting in 2015, the ACA requires applicable large employers (ALEs) to either provide affordable, minimum value health coverage to full-time employees or face penalties. Employers and plan sponsors must also comply with new reporting and disclosure requirements, such as the health coverage reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. In addition, the ACA imposes several taxes and fees on health plan sponsors, such as the transitional reinsurance fee and the tax on high-cost employer plans.

Failing to comply with the ACA’s requirements can cause severe consequences for an employer. The potential Affordable Care Act penalties vary depending on the ACA requirement that is involved and the nature and extent of the violation. Employers should keep these Affordable Care Act penalties in mind as they continue to work on ACA compliance.


Affordable Care Act Penalties

One of the Affordable Care Act penalties, detailed in Code Section 4980D, imposes an excise tax for a group health plan’s failure to comply with certain requirements, including the ACA’s reforms for group health plans. Failing to comply with a group health plan requirement may trigger an excise tax of $100 per day with respect to each individual to whom the failure relates. The $100 per individual, per day excise tax may be triggered by a violation of any of the ACA requirements for group health plans. To see the chart for ACA Requirements and more about the penalties and excise taxes click here.

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