For Applicable Large Employers (ALEs), the Affordable Care Act’s (ACA) employer mandate—formally called the Employer Shared Responsibility Provisions (ESRP)—remains a critical compliance obligation. With penalty amounts updated annually and enforcement procedures evolving, staying ahead is essential.

At ACACSS, we specialize in helping employers navigate ACA compliance, from understanding IRS rules to avoiding costly penalties. This article breaks down the ESRP, the latest penalty updates, and how your business can stay compliant in today’s changing healthcare environment.

Understanding the Employer Shared Responsibility Provisions (ESRP)

The ESRP requires ALEs (employers with 50 or more full-time equivalent employees) to:

• Offer minimum essential coverage (MEC) to full-time employees and their dependents.
• Ensure that coverage is affordable and provides minimum value.
• File and furnish ACA forms (1094-C and 1095-C) to the IRS and employees.

Failure to meet these requirements can trigger significant ACA employer mandate penalties.

Two Types of ESRP Penalties

The IRS enforces two potential penalties under Section 4980H:

• Penalty A – Failure to Offer Coverage
  Applies if an ALE fails to offer MEC to at least 95% of full-time employees (and dependents) and at least one employee receives a premium tax credit through the Health Insurance Marketplace.
  2025 penalty: $2,900 annually per full-time employee (minus the first 30)
  2026 penalty: $3,340 annually per full-time employee (minus the first 30)
• Penalty B – Coverage Not Affordable or Minimum Value
  Applies when coverage is offered but not affordable or fails the minimum value test, and an employee receives subsidized Marketplace coverage.
  2025 penalty: $4,350 annually per affected employee
  2026 penalty: $5,010 annually per affected employee

Note: Employers will not be subject to both penalties for the same employee in the same month.

Recent Updates You Should Know

• Penalty adjustments: The IRS lowered penalties for 2025 compared to 2024, but they will increase again in 2026.
• Court ruling: A federal court recently held that the IRS cannot assess ESRP penalties without certification from the Department of Health and Human Services (HHS). Employers should monitor how this affects enforcement.

How Employers Can Stay Compliant

At ACACSS, we recommend these compliance best practices:

1. Determine ALE status – Calculate full-time and full-time equivalent employees correctly.
2. Track employee hours – Use the IRS measurement methods to identify full-time staff accurately.
3. Design compliant health plans – Ensure coverage is affordable (based on IRS safe harbors) and meets minimum value.
4. File timely ACA forms – Submit 1094-C and 1095-C to the IRS and provide copies to employees.
5. Maintain documentation – Keep clear records of offers, affordability calculations, and eligibility determinations.
6. Monitor changes – Stay updated on IRS guidance, penalty adjustments, and legal rulings.

Common Mistakes That Lead to Penalties

• Miscounting employees or ignoring seasonal/variable hour staff.
• Offering coverage that fails affordability standards.
• Late or inaccurate filing of 1094-C/1095-C forms.
• Ignoring IRS Letter 226J penalty notices.

Why Partner With ACACSS?

Managing ACA compliance is complex, especially with yearly penalty changes and evolving enforcement rules. At ACACSS, we:

• Help employers stay compliant with the ACA employer mandate.
• Provide end-to-end ACA reporting services for IRS filing.
• Assist with penalty prevention and IRS response support.
• Simplify ACA compliance so you can focus on your business.

The ACA employer mandate continues to be a moving target, with updated penalty amounts and shifting enforcement rules. Employers who take a proactive approach can reduce risks and avoid costly fines.

ACACSS is here to ensure your business remains compliant with confidence.

Contact us today at acacss.com to learn how our ACA compliance services can help your organization navigate the employer mandate with ease.