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District Court Throws ACA Employer Mandate Enforcement into Question

  • Writer: Boutwell Fay
    Boutwell Fay
  • 3 hours ago
  • 2 min read

Recently, the U.S. District Court for the Northern District of Texas issued a potentially sweeping decision that could disrupt the enforcement of the Affordable Care Act’s (ACA) employer mandate. In Faulk Co. v. Becerra (N.D. Tex. Apr. 10, 2025), the court declared that the current regulatory framework used to assess excise taxes under Internal Revenue Code (IRC) Section 4980H is void and unenforceable. The court found that a 2013 regulation issued by the Department of Health and Human Services (HHS) unlawfully assigned the responsibility of certifying employees’ eligibility for premium tax credits to the IRS, an authority that, under the ACA, resides with the health insurance Exchanges.


This certification is a critical step under the ACA’s employer mandate. Section 4980H imposes excise taxes on “applicable large employers” – those with 50 or more full-time employees or full-time equivalents – that either (a) fail to offer minimum essential coverage to at least 95% of their full-time employees, or (b) offer coverage that is unaffordable or lacks minimum value. However, these penalties apply only if at least one full-time employee enrolls in coverage through an Exchange and receives a premium tax credit. Section 1411 of the ACA explicitly requires that Exchanges certify this eligibility to the employer. The court concluded that HHS lacked authority to reassign this responsibility to the IRS through regulation, effectively invalidating the IRS’s ability to enforce these penalties in their current form.


While the court acknowledged that other interpretations of the statute were possible, it held that its reading of the text, requiring direct certification from an Exchange, was the best interpretation. As a result, the employer in Faulk was not liable for the penalties assessed and was entitled to a full refund of penalties paid.


If this decision stands, the implications could be significant:


  • Employers who have paid Section 4980H penalties may be eligible for a refund and may want to consider filing a protective refund claim before the statute of limitations expires.

  • Employers currently facing IRS assessments for Section 4980H penalties may have grounds to challenge the enforcement of the employer mandate.

  • Employers should consult with legal counsel if they receive IRS assessments or inquiries regarding compliance with the ACA employer mandate.


Whether this decision will be appealed or prompt further regulatory or legislative response remains to be seen.  



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