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Employer Benefits IQ

ACA 4980H Penalty Estimator 2026/2027

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Estimate employer mandate penalty exposure under IRC 4980H(a) and 4980H(b) for 2026 and 2027 plan years.

Rules-Based™
Regulatory information verified: August 2026
Updates BPS: ACA Compliance & Compliance & Governance

Employer Information

Coverage Details

Coverage meets all ACA requirements — compliant

Affordability (W-2 Safe Harbor)

Quick Reference

  • ALE threshold: 50+ FTEs (including equivalents)
  • 4980H(a): No offer to 95%+ FT employees
  • 4980H(b): Offer doesn't meet MV or affordability
  • 2026 (a) rate: $3,340/yr per FT employee (−30)
  • 2026 (b) rate: $5,010/yr per subsidized employee
  • Affordability 2026: ≤9.96% of W-2 wages
ACA Compliance Guide

Enter your data and click Calculate

Results will show your ALE status, penalty exposure, and compliance action items.

Frequently Asked Questions

What is the ACA employer mandate and who does it apply to?

The ACA employer mandate (IRC 4980H) requires Applicable Large Employers (ALEs) — employers with 50 or more full-time equivalent employees — to offer minimum essential coverage to at least 95% of full-time employees and their dependents. Failure to comply can result in excise tax penalties triggered when any full-time employee receives a premium tax credit on the ACA marketplace.

What is the difference between 4980H(a) and 4980H(b) penalties?

The 4980H(a) 'sledgehammer' penalty applies when an ALE fails to offer minimum essential coverage to at least 95% of full-time employees and at least one full-time employee receives a premium tax credit. The penalty is assessed on all full-time employees (minus 30). The 4980H(b) 'tack hammer' penalty applies when coverage is offered but is unaffordable or fails minimum value, and an employee receives a premium tax credit. The 4980H(b) penalty is assessed only on the employees who received the tax credit.

What are the ACA penalty amounts for 2026?

For 2026, the 4980H(a) penalty is approximately $3,340 per full-time employee (minus 30 employees), annualized. The 4980H(b) penalty is approximately $5,010 per full-time employee who receives a premium tax credit. Source: IRS Rev. Proc. 2025-26. These amounts are indexed annually for inflation. The estimator uses current IRS-published penalty amounts.

What makes health coverage 'affordable' under the ACA?

Coverage is affordable if the employee's required contribution for self-only coverage does not exceed a specified percentage of household income. For 2026, the affordability threshold is approximately 9.02% of household income. Employers typically use one of three IRS safe harbors: W-2 wages, rate of pay, or federal poverty line. The rate of pay safe harbor is most commonly used.

How do I count full-time equivalent employees for ALE status?

Full-time employees work 30+ hours per week (or 130 hours per month). Part-time employees are converted to FTEs by dividing their total monthly hours by 120. Add full-time employees plus FTEs to determine ALE status. Seasonal workers and variable-hour employees require a measurement period analysis. Controlled group rules aggregate related entities for ALE determination.

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