ACA Pay-or-Play Penalties for 2026

The IRS announced increased penalty amounts for 2026 related to the employer shared responsibility (“pay-or-play”) rules under the Affordable Care Act (ACA). The adjusted $2,000 penalty amount is $3,340 (up from $2,900) and the adjusted $3,000 penalty amount is $5,010 (up from $4,350).

Pay-or-Play Rules

The ACA requires applicable large employers (ALES) (50+ full-time employees) to offer affordable, minimum-value (MV) health coverage or face IRS penalties. 

An ALE may face penalties if a full-time employee receives a premium tax credit for individual coverage through an Exchange and the ALE:

• Did not offer coverage to at least 95% of full-time employees and their dependents;
• Offered coverage to most full-time employees, but not to the specific employee who received the credit; or
• Offered health plan coverage to full-time employees that was unaffordable or did not provide MV.

Pay-or-Play Penalty Calculations

Depending on the circumstances, one of two penalties may apply under the pay-or-play rules, the 4980H(a) penalty or the 4980H(b) penalty, as follows:

• Under Section 4980H(a), if an ALE fails to offer coverage to most full-time employees and any employee receives a subsidy, a monthly penalty applies: (full-time employees minus 30) × 1/12 of $3,340 for 2026.
• Under Section 4980H(b), ALEs that offer coverage may still face a penalty if any employee receives a subsidy due to lack of coverage, unaffordable coverage, or a plan that doesn’t provide minimum value. The monthly penalty per employee for 2026 is 1/12 of $5,010, capped at the 4980H(a) penalty.

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