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IRS Announces 2024 Health Plan Affordability Threshold
Compliance News
Thursday, September 14 2023
(By Kathryn Mayer) The 2024 health plan affordability threshold is dropping next year. The IRS announced that the 2024 health plan affordability threshold—which is used to determine if an employer's lowest-premium health plan meets the Affordable Care Act's (ACA's) affordability requirement—will be 8.39 percent of an employee's household income. That's down from this year's 9.12 percent figure. The information was detailed in IRS Rev. Proc. 2023-29, which was released last week.
The 2024 threshold is a significant decrease from 2023, and it is the lowest affordability threshold since the ACA was implemented. The affordability threshold, which affects employers' potential liability for ACA shared-responsibility penalties, is adjusted annually based on health plan premium growth relative to income growth using national health expenditure data from the Centers for Medicare & Medicaid Services.
The adjusted percentage applies on a plan-year basis, so plans will continue to use 9.12 percent to determine affordability in 2024 until their new plan year begins, if it does not begin at the start of the calendar year.
An applicable large employer may rely on one or more safe harbors in determining if coverage is affordable: an employee's W-2, an employee's rate of pay and/or the federal poverty level.
If the employer's coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for marketplace coverage, the employer may be subject to an employer shared responsibility payment, according to a compliance alert by insurance firm Woodruff Sawyer.
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The 2024 threshold is a significant decrease from 2023, and it is the lowest affordability threshold since the ACA was implemented. The affordability threshold, which affects employers' potential liability for ACA shared-responsibility penalties, is adjusted annually based on health plan premium growth relative to income growth using national health expenditure data from the Centers for Medicare & Medicaid Services.
The adjusted percentage applies on a plan-year basis, so plans will continue to use 9.12 percent to determine affordability in 2024 until their new plan year begins, if it does not begin at the start of the calendar year.
An applicable large employer may rely on one or more safe harbors in determining if coverage is affordable: an employee's W-2, an employee's rate of pay and/or the federal poverty level.
If the employer's coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for marketplace coverage, the employer may be subject to an employer shared responsibility payment, according to a compliance alert by insurance firm Woodruff Sawyer.
Click here to read more