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IRS Announces Changes to Affordable Health Plan Threshold for 2024



IRS Announces Changes to Affordable Health Plan Threshold for 2024

IRS Announces Changes to Affordable Health Plan Threshold for 2024.For employers striving to maintain their employee health plan affordability under the Affordable Care Act (ACA), 2024 brings significant alterations.

IRS Announces Changes to Affordable Health Plan Threshold for 2024

The IRS has introduced adjustments to the affordability threshold, which may necessitate employers to reconsider their premium costs. Here’s a breakdown of the key changes:

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1. New Affordability Threshold for 2024

In 2024, the IRS has lowered the health plan affordability threshold. This threshold is a crucial factor in determining if an employer’s lowest premium health plan complies with the ACA’s affordability requirement. The new threshold is set at 8.39% of an employee’s household income for the year 2024. This represents a decrease from the 9.12% threshold used in the 2023 plan year.

2. Implications for Employers and Employees

The decrease in the affordability percentage can have several implications:

  • For employers that had set their employee premium costs at the previous threshold in 2023, keeping the same premium amount in 2024 would render their plans no longer affordable.
  • Individuals’ eligibility for federally subsidized coverage from a public exchange may be affected by this change.
  • Employers could potentially shoulder added responsibility for the healthcare costs of some workers due to the lowered affordability threshold.
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3. ACA Definition of Affordable Coverage

Under the ACA, employer-sponsored minimum essential coverage is considered affordable if an employee’s required contribution for the lowest-cost, self-only option with minimum value does not exceed the annually indexed percentage of the employee’s household income. Employees and their eligible family members cannot receive premium tax credits or cost-sharing reductions for public exchange coverage if they have access to affordable employer-sponsored coverage meeting this standard.

4. Safe Harbor Considerations

Employers have the option to rely on safe harbors when determining coverage affordability. These safe harbors include an employee’s W-2, an employee’s rate of pay, and the federal poverty level. If an employer’s coverage is not deemed affordable under any of these safe harbors, and a full-time employee qualifies for a premium tax credit for marketplace coverage, the employer may be subject to an employer shared responsibility payment.

5. Action Required by Employers

Employers who have used the previous safe harbor dollar amount to set employee contributions need to make adjustments. They should reduce the current employee contribution for the lowest-cost, self-only option to meet the ACA’s affordability limit for the 2024 plan year. It’s crucial for employers to review and adjust their required employee contributions for 2024 coverage to ensure compliance with the applicable safe harbor.

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The IRS’s revised affordability threshold for 2024 has significant implications for employers and employees alike. Employers must take proactive measures to adapt their employee premium costs to meet the evolving ACA requirements and avoid potential liabilities.

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