Employers May Have to Pay More in 2024 as ACA Affordability Threshold Hits New Low for Second Year in a Row

SESCO Management Consultants

  • Under the Affordable Care Act (ACA), applicable large employers (ALEs) that do not offer affordable minimum essential coverage to at least 95% of their full-time employees (and their dependents) under an eligible employer-sponsored health plan may be subject to an employer shared responsibility penalty. Generally speaking, coverage is affordable if the employee-required contribution for self-only coverage is no more than 9.5% (as adjusted each year) of the employee's household income. The adjusted percentage for 2023 is 9.12%.
  • Adjusted Percentage for 2024. The adjusted percentage for 2024 will be 8.39%. This is a decrease of 0.73% from the 2023 affordability threshold of 9.12% and is the lowest affordability threshold to date.
  • Federal Poverty Line (FPL) Safe Harbor. Making calculations based on each employee's household income would be administratively burdensome. Accordingly, there are three safe harbors for determining affordability based on a criterion other than an employee's household income; namely an employee's Form W-2 wages, an employee's rate of pay, or the FPL. If one or more of the safe harbor methods can be satisfied, an offer of coverage is deemed affordable. The FPL safe harbor is the easiest to apply, since an employer has to do just one calculation and can ignore employees' actual wages and is intended to provide employers with a predetermined maximum required employee contribution that will in all cases result in coverage being deemed affordable. Under the FPL safe harbor, employer-provided coverage offered to an employee is affordable if the employee's monthly cost for self-only coverage does not exceed the adjusted percentage (8.39% for 2024) of the federal poverty line for a single individual, divided by 12. For plan years beginning in 2024, a plan will meet the ACA affordability requirement under the FPL safe harbor if an employee's required contribution for self-only coverage does not exceed $101.94 per month.

If you are not a retainer client, contact us to learn about our services by calling 423-764-4127 or click here.