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Changes for 2023 ACA Reporting: What Employers Need to Know

Robyn Carlini • February 15, 2023

Changes for 2023 ACA Reporting: What Employers Need to Know


The IRS has recently updated the Affordable Care Act Questions and Answers page, question number 55, indicating an increase in penalty amounts for noncompliance for both the A and B Penalty for 2023. Penalty A is $2,880, increased from $2,750, while Penalty B is $4,320, increased from $4,120.

Employers should examine their group health plans thoroughly to ensure they provide sufficient coverage for full-time employees, including at least one reasonably priced self-only option that offers minimum value benefits. This is particularly important because the escalating expense of noncompliance should serve as an extra incentive.

Also, a company will not be penalized for both penalties at the same time, but will be penalized for the larger amount.


"A" Penalty


The “A” penalty is subjected to an ALE if they did not offer coverage to at least 95% of their full-time employees and if any of their full-time employees received a subsidy in the health exchange. An ALE is penalized for every full-time employee they employ with the “A” penalty. 


  • An example of the 2023 “A” penalty amount is if an employer with 150 employees fails to provide health insurance to their full-time employees and their dependents and at least one employee purchases insurance through the marketplace, the penalty would amount to $345,600 (120 employees [150 - 30] multiplied by $2,880 each results in $345,600).


"B" Penalty



An ALE can receive the “B” penalty when they have failed to offer coverage that meets Minimum Value Coverage. An ALE will pay this penalty for each employee that received a subsidy from the Market Exchange.


  • Bob’s Staffing Agency only offers a MEC plan to all employees on the day of hire. Three full-time employees at Bob’s Staffing Agency went to the Marketplace and enrolled using PTCs.  At the end of 2023, the Marketplace reports these PTCs to the IRS, which cross-references the 1095c forms filed by Bob’s Staffing Agency.  Confirming that the 4980H(b) penalty is appropriate since a MEC plan was offered and protected Bob’s Staffing Agency from the more expensive 4980H(a) penalty; therefore, Bob’s Staffing Agency owes $12,960.


Affordability Percentage for 2023 has Decreased


The IRS has decreased the affordability threshold for employer-sponsored health coverage from 9.61% in 2022 to 9.12% for 2023. This percentage is used to determine the maximum amount that employers can charge for health coverage, and if an employee's required contribution for self-only coverage does not exceed this threshold, the coverage is considered affordable.


Under the ACA, Applicable Large Employers (ALEs) must offer affordable health insurance coverage to full-time employees. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year.If the ALE does not offer affordable coverage, it may be subject to an Employer Shared Responsibility Payment (ESRP). Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.12% of the employee’s household income in 2023 (prior years shown below). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level. 


If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for Marketplace coverage, the employer may be subject to an employer shared responsibility payment.




About SyncStream


SyncStream maintains a tenured, knowledgeable staff who continually monitors changes to the employer mandate regulations and updates solutions as laws evolve. SyncStream removes the burden of ACA compliance and provides penalty risk assessments and suggested corrections to reduce your company’s risk of high IRS penalties. Subject matter experts utilize SyncStream’s user-friendly compliance software to track employee hours, auto-populate forms, audit forms, and e-file for thousands of ALEs. SyncStream’s Full Service Total ACA solution can simplify your ACA compliance needs.


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Changes for 2023 ACA Reporting: What Employers Need to Know


The IRS has recently updated the Affordable Care Act Questions and Answers page, question number 55, indicating an increase in penalty amounts for noncompliance for both the A and B Penalty for 2023. Penalty A is $2,880, increased from $2,750, while Penalty B is $4,320, increased from $4,120.

Employers should examine their group health plans thoroughly to ensure they provide sufficient coverage for full-time employees, including at least one reasonably priced self-only option that offers minimum value benefits. This is particularly important because the escalating expense of noncompliance should serve as an extra incentive.

Also, a company will not be penalized for both penalties at the same time, but will be penalized for the larger amount.


"A" Penalty


The “A” penalty is subjected to an ALE if they did not offer coverage to at least 95% of their full-time employees and if any of their full-time employees received a subsidy in the health exchange. An ALE is penalized for every full-time employee they employ with the “A” penalty. 


  • An example of the 2023 “A” penalty amount is if an employer with 150 employees fails to provide health insurance to their full-time employees and their dependents and at least one employee purchases insurance through the marketplace, the penalty would amount to $345,600 (120 employees [150 - 30] multiplied by $2,880 each results in $345,600).


"B" Penalty



An ALE can receive the “B” penalty when they have failed to offer coverage that meets Minimum Value Coverage. An ALE will pay this penalty for each employee that received a subsidy from the Market Exchange.


  • Bob’s Staffing Agency only offers a MEC plan to all employees on the day of hire. Three full-time employees at Bob’s Staffing Agency went to the Marketplace and enrolled using PTCs.  At the end of 2023, the Marketplace reports these PTCs to the IRS, which cross-references the 1095c forms filed by Bob’s Staffing Agency.  Confirming that the 4980H(b) penalty is appropriate since a MEC plan was offered and protected Bob’s Staffing Agency from the more expensive 4980H(a) penalty; therefore, Bob’s Staffing Agency owes $12,960.


Affordability Percentage for 2023 has Decreased


The IRS has decreased the affordability threshold for employer-sponsored health coverage from 9.61% in 2022 to 9.12% for 2023. This percentage is used to determine the maximum amount that employers can charge for health coverage, and if an employee's required contribution for self-only coverage does not exceed this threshold, the coverage is considered affordable.


Under the ACA, Applicable Large Employers (ALEs) must offer affordable health insurance coverage to full-time employees. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year.If the ALE does not offer affordable coverage, it may be subject to an Employer Shared Responsibility Payment (ESRP). Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.12% of the employee’s household income in 2023 (prior years shown below). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level. 


If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for Marketplace coverage, the employer may be subject to an employer shared responsibility payment.




About SyncStream


SyncStream maintains a tenured, knowledgeable staff who continually monitors changes to the employer mandate regulations and updates solutions as laws evolve. SyncStream removes the burden of ACA compliance and provides penalty risk assessments and suggested corrections to reduce your company’s risk of high IRS penalties. Subject matter experts utilize SyncStream’s user-friendly compliance software to track employee hours, auto-populate forms, audit forms, and e-file for thousands of ALEs. SyncStream’s Full Service Total ACA solution can simplify your ACA compliance needs.


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