Health Insurance Penalties Jump to $3,340 Per Employee

The IRS just delivered an expensive wake-up call to Long Island employers. The 2026 ACA employer mandate penalties jumped to $3,340 per full-time employee — a 25% increase that could cost mid-sized companies hundreds of thousands of dollars for a single compliance misstep.

Here's the math that should concern every applicable large employer (ALEs with 50+ full-time equivalent employees): If you fail to offer minimum essential coverage to substantially all full-time employees and their dependents, and at least one employee gets subsidized Marketplace coverage, you'll face Penalty A of $3,340 annually per full-time employee (minus the first 30).

The Real Dollar Impact for Long Island Businesses

Consider a typical Nassau County medical practice with 70 full-time employees. If they don't offer compliant coverage and just one employee gets subsidized coverage through NY State of Health, the penalty calculation is brutal: 70 employees minus 30 equals 40 employees × $3,340 = $133,600 in penalties.

The second penalty is even steeper. If you do offer coverage but it's unaffordable or doesn't provide minimum value, Penalty B hits $5,010 per affected employee who receives subsidized Marketplace coverage. For that same practice, if 10 employees qualify for subsidies, that's $50,100 in penalties.

These aren't theoretical numbers. The IRS actively pursues these penalties, and they're indexed to inflation — meaning they'll keep climbing every year.

Compliance Deadlines Are Already Here

Since we're in January 2026, these penalty amounts are already in effect for plan years that began after December 31, 2025. If you haven't reviewed your coverage requirements yet, you're already operating under the new penalty structure.

Adding to the compliance burden, ACA reporting penalties for your 2025 data (due in 2026) also increased. Incorrect Form 1095-C filings now cost $340 per form, though you can reduce this to $60 if you correct errors within 30 days. Miss the correction window, and it jumps to $130 per form. Intentional disregard carries a $680 penalty with no cap.

Why Group Plans Beat Going Solo

These penalty increases highlight why professional guidance on group health plans remains the smart choice for most Long Island employers. While some companies consider alternatives like Individual Coverage HRAs (ICHRA) to shift employees to individual Marketplace plans, this strategy often backfires.

Employees buying individual coverage lose the group's negotiating power and face plan selection alone — often making poor choices that lead to surprise medical bills and employer blame. When claims get denied or problems arise, there's no professional advocate helping them navigate the system. Proper ACA compliance and reporting requires expertise that most small businesses don't have in-house.

The Bottom Line for Long Island Employers

These penalty increases aren't just regulatory updates — they're significant business expenses that can derail budgets and cash flow. A single compliance error now carries six-figure consequences for many Suffolk and Nassau County employers.

The math is simple: investing in compliant group coverage with professional administration costs far less than paying penalties. When you factor in employee retention and recruitment advantages of comprehensive benefits, the ROI becomes even clearer.

For employers still evaluating their 2026 coverage strategy, the penalty structure makes the decision urgent. Benton Oakfield handles ACA compliance reporting and employer mandate requirements so Long Island businesses can focus on growth instead of penalty avoidance.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This summary is for informational purposes only. Please contact your Benton Oakfield representative to review how these changes impact your specific plan documents.

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