The Affordable Care Act (ACA) continues to impact how employers structure their benefits — especially for companies with 50 or more full-time employees. As we move through 2025, compliance isn’t just about offering coverage. It’s about offering the right coverage to the right employees — and avoiding penalties that can add up quickly.
Whether you’re close to the 50-employee threshold or already managing a larger team, here’s what you need to know to stay compliant and penalty-free this year.
What Is the ACA Employer Mandate?
The ACA requires Applicable Large Employers (ALEs) — those with 50+ full-time equivalent employees — to do two things:
- Offer Minimum Essential Coverage (MEC) to at least 95% of full-time employees and their dependents.
- Ensure that coverage is affordable and meets minimum value standards.
Failing either of these requirements can result in significant IRS penalties under Sections 4980H(a) and 4980H(b).
2025 Penalty Amounts
Here’s what’s at stake in 2025:
- 4980H(a) Penalty (for not offering coverage):
$2,970 per full-time employee (after subtracting the first 30 employees).
- 4980H(b) Penalty (for offering unaffordable or low-value coverage):
$4,460 per affected employee who receives a premium tax credit.
These penalties are assessed monthly and can add up fast.
What Counts as “Affordable” in 2025?
For 2025, the ACA affordability threshold is 8.39% of an employee’s household income (down from 9.12% in prior years). Most employers use the Rate of Pay or Federal Poverty Line safe harbors to determine compliance.
Pro tip: Just because you’re offering a plan doesn’t mean it’s affordable under the ACA.
How to Stay Compliant (and Confident)
Here’s how your business can avoid employer mandate penalties this year:
- ✅ Track Employee Hours Carefully: Especially for variable-hour, part-time, and seasonal employees.
- ✅ Review Plan Affordability: Use one of the safe harbors and double-check your lowest-cost plan.
- ✅ Audit Offer Rates: Make sure you’re offering coverage to at least 95% of your full-time workforce.
- ✅ Distribute 1095-C Forms Accurately and On Time: IRS deadlines still matter.
- ✅ Partner with a Benefits Advisor: ACA compliance is complex, but it doesn’t have to be confusing.
If you’re unsure whether your plan meets ACA standards — or whether your tracking/reporting is up to par — now is the time to act. The IRS has ramped up enforcement, and penalties are real. At Cypress Benefit Solutions, we help businesses simplify compliance while offering benefits employees actually appreciate.
