ACA Affordability Percentage Reduced Again

In Revenue Procedure 2023-29, the IRS announced the new Affordable Care Act (ACA) affordability percentage of 8.39 for 2024 employer health benefit plans.  For employers who set 2023 employee premium costs right at the affordability threshold, their plans will no longer be affordable if employees are charged the same amount in 2024.

Applicable large employers (ALEs) required to provide health plan coverage to avoid the employer shared-responsibility penalties should reevaluate their health plan contribution structure each year before open enrollment to ensure that their plans are still “affordable.”  A failure to consider whether the plan is affordable when passing through any premium increases could result in an unintended penalty for each employee who enrolls in exchange coverage and qualifies for financial assistance.

ALEs must have at least one health plan option where the employee’s share of single coverage is less than the affordability percentage multiplied by the employee’s household income.  The IRS adjusts the affordability percentage each year, and for 2024 the cost of single coverage must be less than 8.39% of an employee’s household income in order to be affordable.  The 8.39 affordability percentage is the same percentage that employers must use when relying on the federal poverty level, rate of pay, or W-2 affordability safe harbor.  This percentage is down from the 2023 percentage of 9.12, so an employer plan that was affordable in 2023 may not be unaffordable in 2024 even if plan design and premiums stay exactly the same.

Contact ASR Health Benefits at (616) 957-1751 or (800) 968-2449 for more information.