The Hidden Cost of Non-Compliance: How MEC Plans Help You Avoid IRS Penalties

If you employ 50 or more full-time or full-time-equivalent workers, offering health coverage isn’t just a good idea—it’s the law. Under the Affordable Care Act (ACA), Applicable Large Employers (ALEs) must provide Minimum Essential Coverage (MEC) or face substantial IRS penalties.

Yet, many businesses in industries with high turnover—like staffing, restaurants, and home care—don’t realize just how quickly those penalties can add up. Even a few months of non-compliance can result in tens or hundreds of thousands of dollars in costs.

Here’s what you need to know about the hidden costs of non-compliance—and how MEC plans help protect your bottom line.

The Real Numbers: ACA Employer Shared Responsibility Penalties

The ACA outlines two main types of penalties:

Penalty A: No Coverage Offered
If you fail to offer MEC to at least 95% of full-time employees and their dependents, you’re subject to Penalty A.

2025 Penalty A amount:

  • $2,970 per full-time employee (minus the first 30 employees)

  • Example: A staffing firm with 150 full-time employees would face:
    (150 – 30) × $2,970 = $356,400 annually

Penalty B: Coverage Offered But Not Affordable or Not Minimum Value
If you offer MEC but it’s either unaffordable or doesn’t meet minimum value (meaning it doesn’t cover at least 60% of costs), you’re subject to Penalty B.

2025 Penalty B amount:

  • $4,460 per employee who gets subsidized coverage through the Marketplace

  • This can still cost thousands—even if only a handful of employees qualify for subsidies.

Why These Penalties Often Catch Employers by Surprise

Many companies assume they’re too small, that their turnover exempts them, or that partial coverage is “good enough.” Unfortunately, the IRS doesn’t see it that way.

According to the Treasury Inspector General for Tax Administration, the IRS assessed over $15 billion in ACA employer mandate penalties between 2015 and 2020—and collections have only ramped up as reporting systems improved.

The takeaway: Non-compliance isn’t just risky—it’s expensive.

How MEC Plans Help You Avoid Penalties

A MEC plan is designed to satisfy the ACA’s basic coverage requirement.

How it works:

  • MEC plans cover essential preventive services, such as immunizations, screenings, and annual exams.

  • By offering MEC to at least 95% of full-time employees, you avoid Penalty A.

  • When paired with an affordability strategy (like offering a MEC plan plus a limited medical plan), you can further reduce exposure to Penalty B.

For many businesses, this strategy balances compliance with cost control—without the expense of major medical insurance for every worker.

MEC Plans in Action: A Quick Scenario

Example:
A restaurant chain with 80 full-time employees chooses not to offer any coverage.

Penalty A: (80 – 30) × $2,970 = $148,500 per year in penalties.

Instead, by offering a MEC plan at an affordable, per-employee monthly rate, the employer satisfies the requirement to offer coverage—eliminating that six-figure risk.

3 Steps to Get Ahead of Non-Compliance

  1. Audit your workforce.
    Identify how many full-time employees and variable-hour workers you have.

  2. Review your current coverage.
    Ensure your offering meets the MEC standard and is affordable if you want to avoid both Penalty A and B.

  3. Consult a trusted MEC plan provider.
    Partner with experts who can help with compliance, reporting, and ongoing administration.

Protect Your Business from Unnecessary Costs

The IRS doesn’t accept “we didn’t know” as a defense. If you’re unsure about your compliance status or want to explore how MEC plans can safeguard your business, we’re here to help.

Ready to get started? Contact us for a no-obligation consultation to discuss your options.

Ryan Brown