ACA Pay-or-Play Penalties for 2027 Released

The IRS announced higher 2027 employer shared responsibility (“pay-or-play”) penalties under the Affordable Care Act (ACA). For 2027, the adjusted $2,000 penalty increases to $3,780 and the adjusted $3,000 penalty increases to $5,670, up from $3,340 and $5,010 for 2026.

Pay-or-Play Rules

Under the ACA, applicable large employers (ALEs) (those with 50 or more full-time and full-time equivalent employees) must offer affordable, minimum-value (MV) health coverage to full-time employees and their dependents or risk IRS penalties. An employer may face a “pay-or-play” penalty if at least one full-time employee receives a premium tax credit on the Exchange because coverage was not offered to substantially all full-time employees and dependents, was not offered to that specific employee, or was unaffordable or did not provide minimum value.

Pay-or-Play Penalty Calculations

Under the pay-or-play rules, the IRS can assess one of two penalties, 4980H(a) or 4980H(b):

1. Under Section 4980H(a), an ALE that does not offer coverage to substantially all full-time employees and dependents and has at least one full-time employee receiving an Exchange subsidy, is subject to a monthly penalty. This is calculated as the number of full-time employees (minus 30) times one-twelfth of $3,340 for 2027.
2. Under Section 4980H(b), even ALEs that offer coverage to substantially all full-time employees and dependents may face penalties if at least one full-time employee receives an Exchange subsidy because coverage was not offered, was unaffordable, or did not provide minimum value. The monthly penalty is one-twelfth of $5,010 per subsidized full-time employee for 2027, capped at the 4980H(a) maximum.

Download the bulletin for more details.