Question 1

How do I calculate my ACA employer shared responsibility payment (ESRP)?

Accepted Answer

The 4980H(a) ESRP is calculated as: (number of full-time employees − 30) × $3,340 (2026 amount, indexed annually). This penalty applies if you fail to offer MEC to 95% of full-time employees and at least one employee gets a tax credit. The 4980H(b) ESRP is: number of full-time employees who received a premium tax credit × $5,010 (2026). You pay whichever is less. Use this calculator to estimate your potential exposure.

Question 2

What triggers an ACA employer shared responsibility payment?

Accepted Answer

An ESRP is triggered when: (1) an ALE fails to offer minimum essential coverage to at least 95% of full-time employees and their dependents, AND at least one full-time employee receives a premium tax credit on the exchange (4980H(a)); OR (2) an ALE offers coverage but it is unaffordable (employee premium exceeds 9.02% of household income in 2026) or does not meet minimum value (pays less than 60% of covered costs), AND at least one full-time employee receives a premium tax credit (4980H(b)).

Question 3

What is the ACA affordability threshold for 2026?

Accepted Answer

For 2026, coverage is affordable if the employee's required contribution for self-only coverage does not exceed 9.02% of household income. Because employers cannot verify household income, the IRS provides three safe harbors: W-2 wages (9.02% of Box 1 W-2 wages), rate of pay (9.02% of monthly rate of pay × 130 hours), and federal poverty line (9.02% of the federal poverty line for a single individual, which is $14,580 in 2026 — meaning the employee contribution cannot exceed $1,316/year or $109.67/month).

Question 4

How does the IRS notify employers of ACA penalty assessments?

Accepted Answer

The IRS issues Letter 226-J to notify employers of a proposed ESRP assessment. The letter includes a summary of the proposed penalty, the tax year involved, and instructions for responding. Employers have 30 days to respond (with extensions available). Employers should review the IRS's calculation, verify the list of employees who received tax credits, and respond with any corrections or documentation. Many 226-J letters contain errors that can be corrected through the response process.

Question 5

Can employers appeal an ACA penalty assessment?

Accepted Answer

Yes — employers can respond to Letter 226-J to dispute the proposed assessment. Common grounds for dispute include: the employee was not a full-time employee, the employee was offered affordable minimum value coverage, the employee was in a waiting period, or the IRS calculation contains errors. If the employer disagrees with the IRS's response to the 226-J reply, they can request a conference with the IRS Office of Appeals. Engaging an ERISA attorney or ACA compliance specialist is recommended for significant penalty assessments.

ACA Penalty Calculator

ACA 4980H Penalty Estimator