You are using an unsupported browser. The experience will be lacking unless you upgrade. We recommend Firefox, Chrome or Edge. Sorry for the inconvience.

Want us to let you know when we publish new articles?

Enter your email below and we will make sure to keep you up to date on all things ACA

Latest COVID Relief Bill Expands the Number of Individuals Who Can Trigger Employer Penalties Under the ACA

April 27, 2021


Just as many employers were rushing to complete and submit the Forms 1094-C and 1095-C to the IRS, President Biden signed The American Rescue Plan into law. Among other items, and of the utmost importance to employer compliance departments, The American Rescue Plan significantly expands the number of individuals who are eligible for a premium tax credit in 2021 and 2022. As a result, employers must be particularly diligent with their ACA compliance in 2021 and 2022. The remainder of this article examines this issue in greater detail.

Prior to The American Rescue Plan, individuals could not receive a premium tax credit if the individual’s household income was more than 400 percent of the Federal Poverty Level. This fact was important because full-time employees who receive a premium tax credits are the only employees who can trigger a section 4980H penalty (i.e. the employer mandate penalties). Consequently, paying close attention to those full-time employees who possibly had a household income of less than 400 percent of the Federal Poverty Level was vital as those were the employees who could cause massive penalties against the employer if mistakes were made with ACA compliance.

In late March, President Biden signed The American Rescue Plan into law to assist individuals and employers with the impact of the COVID-19 crisis. Section 9661 of the law significantly expanded the number of individuals who could receive a premium tax credit by amending Internal Revenue Code section 36B(b)(3)(A). The amendment, which is only effective in 2021 and 2022 as of now, does away with the 400 percent Federal Poverty Level cap when it comes to determining whether an individual is eligible for a premium tax credit. Consequently, any full-time employee who receives a premium tax credit could trigger a section 4980H penalty.

Importantly, an employer who offers a full-time employee minimum essential coverage at an affordable price will be protected from that particular employee triggering a section 4980H penalty. For 2021, the affordability threshold has been set at 9.83 percent. Therefore, it is more important than ever that every applicable large employer is confident that each full-time employee meets one of the three affordability safe harbors which were discussed at length in our previous publication.

Section 9661 of The American Rescue Plan also altered the amount of the premium tax credit an individual can receive. However, from an employer’s perspective this is generally not important to understand and is extremely technical. Every employer must make sure all its full-time employees fit underneath one of the affordability safe harbors for 2021 and 2022. Employers should have been doing this in prior years, but the amendments made to the eligibility conditions for premium tax credits makes it imperative now. Accord Systems still has an impeccable record with assisting clients in avoiding ACA penalties. If you have any questions or think Accord Systems may be able to assist with your ACA compliance needs, please contact us.


About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorneys P.C. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.


Legal Consent

The information contained on this site is not, nor is it intended to be, legal advice. An attorney should be consulted for advice regarding your situation. Copyright © 2021 by Accord Systems, LLC. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.