The employer rules, in plain words

Be ready before the letter comes.

For 2015 and 2016, the IRS proposed nearly $17 billion in employer penalties and assessed $749 million.

A company with 50 or more full-timers has to offer affordable coverage that meets minimum value, and report it every year on the 1094-C and 1095-C. Miss one, or file it wrong, and a letter can come with a penalty on it. Here are the rules, the published numbers, and what Benehive keeps so you can answer.

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The Treasury Inspector General for Tax Administration
nearly $17 billionin employer penalties the IRS initially calculated for tax years 2015 and 2016
$749 millionassessed, for cases closed or in process as of July 27, 2019
nearly $24 millionproposed in the 90 cases that were adjusted, in TIGTA’s sample of 118 tax year 2015 cases…
about $88,000…after examiners adjusted the proposed amounts
Source: TIGTA, “Improvements Are Needed to Ensure That Employer Shared Responsibility Payments Are Properly Assessed,” Report 2020-43-028, June 10, 2020.
1

Are you an ALE?

An applicable large employer (ALE) averaged at least 50 full-time employees, counting full-time equivalents, during the year before. Every rule on this page starts here.

What Benehive doesCounts it from your own roster and payroll, month by month (hours a week × 52 ÷ 12 for a month), and shows you the number before the year starts.
The ruleIn plain words
Full-timeaverages at least 30 hours of service a week, or 130 hours in a month
Full-time equivalentsthe month’s hours of everyone who isn’t full-time (no more than 120 for any one person), added up, then divided by 120
An ALEfull-timers plus equivalents average at least 50 over the year before
Source: IRS, Questions and Answers on Employer Shared Responsibility.
2

Offer coverage to 95% of full-timers

An ALE has to offer health coverage to at least 95% of its full-time employees and their dependents. If it doesn’t, and even one full-timer gets a premium tax credit on the Marketplace, the payment counts every full-timer, minus up to 30.

Miss it: $3,340 a year for each full-time employee, minus up to 30, for 2026; $3,780 for 2027.
What Benehive doesKeeps who was offered what, every month, from the first form: the offer, the plan they took or the waiver they signed.
Offered to fewer than 95%, and one full-timer gets a premium tax creditPer full-time employee, minus up to 30
2026$3,340 a year (Rev. Proc. 2025-26)
2027$3,780 a year (Rev. Proc. 2026-22)
Example, a made-up company: 100 full-timers and no offer in 2026: (100 − 30) × $3,340 = $233,800 for the year.
Sources: IRS Rev. Proc. 2025-26 (2026); IRS Rev. Proc. 2026-22 (Internal Revenue Bulletin 2026-22) (2027); IRS, Questions and Answers on Employer Shared Responsibility.
3

Affordable

The lowest-cost employee-only plan you offer that meets minimum value can’t cost the employee more than a set share of their pay. The IRS gives three ways to measure it, called safe harbors, and you choose which to use.

Miss it: $5,010 a year for each full-timer who gets a premium tax credit because the plan wasn’t affordable, for 2026; $5,670 for 2027.
What Benehive doesWorks out the most each person can be charged under your safe harbor, and flags anyone over it before the offer goes out.
Plan yearMost an employee paysSource
20269.96% of payRev. Proc. 2025-25
202710.22% of payRev. Proc. 2026-26
The employee-only price of the lowest-cost plan offered that meets minimum value.
Safe harborMeasured against
Form W-2the wages in box 1 of the employee’s Form W-2
Rate of paythe employee’s rate of pay at the start of the coverage period
Federal poverty linethe poverty line for one person, divided by 12: $15,960 × 9.96% ÷ 12 = $132.46 a month for 2026, rounded down
Sources: IRS, Questions and Answers on Employer Shared Responsibility; HHS Poverty Guidelines, 2026 ($15,960, one person, the 48 contiguous states and D.C.); Rev. Proc. 2025-25. Penalty: IRS Rev. Proc. 2025-26 (2026); IRS Rev. Proc. 2026-22 (Internal Revenue Bulletin 2026-22) (2027).
4

Minimum value

The plan has to cover at least 60% of the total allowed cost of benefits, and it has to provide substantial coverage of inpatient hospital services and physician services. CMS’s Minimum Value Calculator scores the 60%. Reaching 60% isn’t enough on its own: a plan that caps hospital days, doctor visits or surgeries has to meet the second test too, whatever its score.

Miss it: the same $5,010 a year for each full-timer who gets a premium tax credit, for 2026; $5,670 for 2027.
What Benehive doesScores every plan with the calculator before you buy, shows the HRA that brings a plan to 60%, and tells you when no HRA can.
The ruleIn plain words
60%covers at least 60 percent of the total allowed cost of benefits
The second testprovides substantial coverage of inpatient hospital services and physician services (26 CFR 1.36B-6(a)(1)(ii))
The calculatorthe Minimum Value Calculator CMS lists today, mv-calculator-final-4-11-2013.xlsm
See the minimum value check in the demo →
Sources: IRS, Questions and Answers on Employer Shared Responsibility; CMS, Regulations and Guidance: Minimum Value Calculator (XLSM), mv-calculator-final-4-11-2013.xlsm; 26 CFR 1.36B-6(a)(1)(ii); IRS Rev. Proc. 2025-26; IRS Rev. Proc. 2026-22 (Internal Revenue Bulletin 2026-22).
5

Know your floor

The law doesn’t ask for a 90% plan. It asks for a plan that reaches 60%, at an employee-only price the employee can afford. What the company has to pay is that plan’s employee-only price minus the most the employee can be charged. If the plan needs an HRA to reach 60%, the HRA goes on top. Everything above that floor is the company’s choice.

Paying for a richer plan is fine. Just know what’s required and what’s a choice.

What Benehive doesFinds the plan that reaches 60%, on its own or with an HRA, works out the most each employee can be charged under your safe harbor, and shows the floor per full-timer before you pick a plan.
An example, 2026A month
A plan that reaches 60%, employee only$426.00
The most the employee can be charged, poverty-line safe harbor: 9.96% × $15,960 ÷ 12, rounded down− $132.46
The company’s floor, per full-timer$293.54
For 2027 the percentage is 10.22%. With the W-2 or rate-of-pay safe harbor, use the employee’s own pay in place of the poverty line.
Made-up numbers to show the math, for a made-up company. Sources: Rev. Proc. 2025-25 (9.96%, 2026); Rev. Proc. 2026-26 (10.22%, 2027); HHS Poverty Guidelines, 2026; IRS, Questions and Answers on Employer Shared Responsibility.
6

The 1094-C and 1095-C

Every ALE files a 1094-C with the IRS and furnishes a 1095-C to each of its full-time employees. In TIGTA’s sample, most of the adjusted cases involved an employer that had reported on its own 1094-C that it didn’t offer coverage.

Miss it or get it wrong: a penalty for each return and each statement, both the IRS copy and the employee’s.
What Benehive doesBuilds every 1095-C and the 1094-C from the month-by-month record, the month it happens, ready for a person to review and file.
2025 formsDue
To employees (1095-C)March 2, 2026
To the IRS, on paperMarch 2, 2026
To the IRS, electronicallyMarch 31, 2026
10 or more returnsmust be filed electronically
Source: IRS, Instructions for Forms 1094-C and 1095-C (2025). The sample: TIGTA Report 2020-43-028.
Returns due in 2026Per return or statement
Up to 30 days late$60
31 days late through August 1$130
After August 1, or not filed$340
Intentional disregard$680, with no yearly maximum
Source: IRS, Information return penalties (yearly maximums apply below intentional disregard).
7

The letter: 226-J

When the IRS thinks you owe, it sends Letter 226-J: a proposal, not yet a bill. You answer by the response date on the letter, which generally will be 30 days from the date of the letter. And in the D.C. Circuit, a lawsuit to stop the payment before it’s assessed is barred, because the court held it’s a tax.

Don’t answer: the IRS assesses the proposed amount and sends a notice and demand for payment, Notice CP 220J.
What Benehive doesHas the month-by-month answer ready: who was offered what, the signed waivers, the plan’s minimum value and price, so the reply goes back on time.
StepWhat happens
Letter 226-Jthe proposal, with a response date generally 30 days from the date of the letter
Your answerForm 14764 (agree or disagree), and Form 14765 (PTC Listing) to show the changes when you disagree
No answerthe IRS assesses it and sends Notice CP 220J
Letter 227the IRS’s reply; a conference with the IRS Office of Appeals can be asked for, generally within 30 days of Letter 227
Court first?the D.C. Circuit held a Section 4980H payment is a “tax” for the Anti-Injunction Act, so a suit to stop it before assessment is barred there (Optimal Wireless)
Sources: IRS, Understanding your Letter 226-J; IRS, Questions and Answers on Employer Shared Responsibility; Optimal Wireless LLC v. IRS, No. 22-5121 (D.C. Cir. Aug. 8, 2023).
8

The proof it’s real

The Treasury Inspector General for Tax Administration (TIGTA) looked at the IRS’s first years of employer penalties. The proposals were huge; what was assessed was a fraction of it. In its sample, 82 of the 90 adjustments were based on the employer’s own response, and most of the adjusted cases involved an employer that had reported on its 1094-C that it didn’t offer coverage.

What Benehive doesKeeps the records a letter asks about, from day one: who was offered what, each month, and the signed waivers.
TIGTA found
Proposed, tax years 2015 and 2016 (cases closed or in process as of July 27, 2019)nearly $17 billion
Assessed$749 million
A sample of 118 tax year 2015 cases90 cases adjusted, from nearly $24 million down to about $88,000
Why they were adjusted82 of the 90 were based on the employer’s response noting it had made an error
Source: TIGTA, “Improvements Are Needed to Ensure That Employer Shared Responsibility Payments Are Properly Assessed,” Report 2020-43-028, June 10, 2020.

What Benehive keeps, from day one

The software prepares it; a person reviews it; you keep it, on your own page, every year.

The countWhether you’re an ALE, from your roster and payroll, month by month.
The first formEvery offer, the plan each person took, and a signed waiver from anyone who said no.
Monthly proofA record of every person, every month, locked when you confirm it.
The IRS formsThe 1094-C and every 1095-C, from that record, on the IRS’s own forms.
Minimum valueEach plan scored before you buy, and the HRA that gets it to 60%.
The answer to a letterEverything a 226-J asks for, from the month it happened.
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The demo is a made-up company. Sign in with any email and password; nothing you do there is saved or sent.

Not tax advice. This is general information about our software and the published rules. It isn’t tax or legal advice, and it doesn’t tell you what to do for your company. Each number shows where it was published.