Penalty A vs Penalty B: one for not offering coverage, one for offering coverage that still leads to a subsidy.
Section 4980H of the tax code has two payments. The first applies when an applicable large employer does not offer full-time employees the opportunity to enroll in minimum essential coverage and at least one receives a premium tax credit. The second applies when coverage is offered but a full-time employee still receives the credit.
This guide compares them. The 2027 indexed amounts are in the 2027 affordability guide. Send us your renewal and we will test your offer.
How they differ.
Penalty A: No Offer
Owed for a month if the employer fails to offer full-time employees and their dependents the opportunity to enroll in minimum essential coverage and at least one full-time employee receives a premium tax credit. It is calculated on all full-time employees less 30.
Penalty B: Offer That Still Leads to a Credit
Owed if coverage is offered and a full-time employee receives a premium tax credit. It is calculated only on the employees who receive the credit and is capped.
Where Minimum Value Fits
Under the regulations, an offer that is unaffordable or fails minimum value can leave the employee eligible for the credit. See the 60 percent test.
Side by side.
| Feature | Penalty A | Penalty B |
|---|---|---|
| Trigger | No opportunity to enroll in minimum essential coverage | Coverage offered, employee still receives a credit |
| Statutory base amount | $2,000 a year per full-time employee less 30 | $3,000 a year per employee receiving the credit |
| Indexed | Yes, adjusted each year | Yes, adjusted each year |
| Cap | Not applicable | Total cannot exceed Penalty A style amount |
Three questions about the payments.
Does the employer mandate apply under 50 employees?
No. Only applicable large employers, generally those with an average of at least 50 full-time employees including full-time equivalents, are subject. See section 4980H.
What are the 2027 amounts?
The indexed 2027 amounts are listed in the 2027 affordability guide.
How is a full-time employee defined?
An employee averaging at least 30 hours of service per week.
Where these figures and rules come from.
26 U.S.C. 4980H
The employer shared responsibility payments and the large-employer definition are in section 4980H.
26 CFR 1.36B-6
The minimum value standard and how contributions count are in 26 CFR 1.36B-6.
Related guides.
Minimum Essential Coverage vs Minimum Value
The main guide to the two standards.
The 60 Percent Test
What minimum value measures.
HSA, HRA and Wellness Credits
What counts toward minimum value.
Section 4980H Explained
The statute in plain terms.
Minimum Value and Network Type
How network design interacts with the test.
Coverage Tiers Explained
EE, ES, EC and EF in plain terms.
Send us your renewal.
Four documents — the renewal letter, the plan summary, the contribution split by tier and enrolled counts by tier. We’ll come back with a competitive read, where we see opportunity, and the five questions we’d put to your carrier.
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