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In Revenue Procedure , the IRS significantly decreased the affordability percentage from 9.12% to 8.39% for 2024.

Background

Under §4980H, applicable large employers (50 or more full-time equivalents (FTEs)) must offer coverage to full-time employees that is affordable to avoid potential §4980H(b) penalties.

Coverage is considered “affordable� under §4980H(b) requirements if the employee contribution satisfies at least one of three available safe harbors (i.e., federal poverty level (FPL), rate of pay, or Form W-2).

In addition, individuals enrolling for coverage through a public Exchange will not qualify for subsidized coverage if they are eligible for employer-sponsored group health plan coverage that is affordable.

Coverage is generally considered “affordable� if the employee contribution for employee-only (single) coverage does not exceed a set percentage of household income.

Note � The “family glitch� was removed by regulators, so coverage that is affordable to just the employee does not automatically block dependents from public Marketplace tax credits.  However, employers do not need to provide affordable coverage for dependents to avoid the §4980H(b) penalty.  Only single coverage is evaluated for employers under §4980H(b).

Required Contribution Percentage

Originally, for 2014, the required contribution percentage for determining affordability was set at 9.5%. The percentage is adjusted annually. See applicable percentages for several years in the table below, along with the dollar thresholds for single coverage to be FPL affordable those years.

Affordability Percentage	2019	2020	2021	2022	2023	2023
	9.86%	9.86%	9.83%	9.61%	9.12%	8.39%
FPL Affordability � Calendar Year Plan	$99.75	$101.79	$104.52	$103.14	$103.28	$101.93
FPL Affordability � Non-Calendar Year Plan	$102.62	$103.99	$105.50	$108.83	$110.80	TBD

Application

For calendar year plans, 8.39% applies beginning in January 2024, but for a non-calendar year plan, 8.39% applies with the plan year beginning in 2024.

The decrease in the affordability percentage (from 9.12% in 2023 to 8.39% in 2024) may require employers to lower employee contributions for the 2024 plan year to meet the affordability requirements under §4980H(b).

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