IRS Significantly Decreases 2024 ACA Affordability to 8.39%
The Internal Revenue Service (IRS) recently released Revenue Procedure 2023-29, reducing the Affordable Care Act’s (ACA) affordability percentage to 8.39% for plan years beginning in 2024, down from 9.12% in 2023 (which was further decreased from 9.61% in 2022).
What is the Affordability Percentage?
The affordability percentage is the maximum rate of the employee’s household income that a person can spend on self-only coverage while allowing the employer to comply with the ACA’s affordability requirement.
With the 8.39% 2024 rate, health plans will be priced at their lowest levels since the ACA was passed. With both the Inflation Reduction Act of 2022 and the American Rescue Plan Act of 2021 expanding the ACA premium tax credit subsidies while decreasing the percentage of household income required to be contributed for Marketplace coverage, industry experts expect to see continued reductions to the affordability percentages for years to come.
What does this mean for employers?
- For plan years beginning in 2024, applicable large employers (ALEs) must offer at least one health plan that does not exceed 8.39% of the employee’s household income for the cost of self-only coverage.
- As a reminder, ALEs are employers with an average of 50 or more full-time or full-time equivalent employees in the previous calendar year.
- Because of this rate reduction, ALEs may need to revisit both employer and employee contributions to the health plan to meet the new affordability requirement.
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