Health Plan Affordability Threshold Drops for the 2024 Plan Year
According to IRS Rev. Proc. 2023-29, the Affordable Care Act (ACA) threshold for determining the affordability of employer-sponsored health coverage will drop to 8.39% of an employee's household income for the 2024 plan year. This is a significant decrease from the 2023 plan-year level of 9.12%. The adjusted percentage applies on a plan-year basis, so plans will continue to use 9.12% to determine affordability in 2024 until their new plan year begins, if it does not begin at the start of the calendar year.
The affordability threshold affects employers' potential liability for ACA shared-responsibility penalties. It 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.
Applicable large employers may rely on one or more safe harbors to determine whether coverage is affordable. These include an employee's W-2, an employee's rate of pay and/or the federal poverty level.
Employers should review the required employee contribution for 2024 coverage if they plan to meet the ACA's affordability limit under the applicable safe harbor and check with their insurance professional or qualified tax advisor to see if this penalty may apply.