The ACA employer mandate B penalty, explained.
The B payment applies when an employer offers coverage that is not affordable or does not provide minimum value and an employee receives a premium tax credit.
What the IRS says.
When It Applies
The B payment applies when coverage is offered but is not affordable or does not provide minimum value, and an employee receives a premium tax credit for marketplace coverage.
How It Is Calculated
For 2026 the amount is $5,010 per such employee, figured monthly, and the total cannot exceed what the A payment would be. The figure comes from the IRS indexing notice, Rev. Proc. 2025-26.
Affordability for 2026
Coverage is affordable for 2026 plan years if the employee cost for the lowest priced self only minimum value option is no more than 9.96 percent of income, measured with an IRS safe harbor.
Three steps for the employer.
Review Your Contribution Strategy
Check whether the lowest cost option meets the affordability test under a safe harbor, since small changes in contribution can change the result.
Confirm Minimum Value
Ask your carrier to confirm each plan you offer provides minimum value.
Example
A hypothetical ALE offers coverage that is unaffordable for 10 full time employees who each receive a premium tax credit for all 12 months of 2026. 10 times $5,010 is $50,100, below the A payment cap for an employer of this size.
Three questions to settle first.
Which Safe Harbor Do We Use?
Ask your adviser which affordability safe harbor you apply and whether it is the best fit.
Does Our Cheapest Plan Qualify?
Ask whether the lowest cost self only option meets minimum value and affordability.
Did We Report the Right Codes?
Ask your provider whether the offer and affordability codes on the forms match your plan.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
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