The IRS has recently issued Revenue Procedure 2023-29, announcing a significant change in the Affordable Care Act (ACA) benchmark for evaluating the affordability of employer-sponsored health coverage. This alteration lowers the threshold to 8.39 percent of an employee’s household income for the 2024 plan year. This represents a substantial reduction of almost three-quarters of a percentage point, marking the lowest percentage since the metric was introduced in 2014.
ACA Rules: Affordable Employer-Sponsored Coverage and Implications for Large Employers
Under the ACA, employer-sponsored minimum essential coverage (MEC) is deemed affordable if an employee’s required contribution for the most affordable, self-only coverage with minimum value does not exceed a yearly indexed percentage of the employee’s household income. Eligible individuals and their family members who have access to this affordable employer-sponsored MEC do not qualify for premium tax credits or cost-sharing reductions for public exchange coverage.
This decrease in the affordability threshold will necessitate larger contributions from applicable large employers (ALEs) to meet the affordability criteria.
Navigating ACA Changes: Implications and Considerations for Employers in 2024
Employers should promptly start planning for their 2024 benefits package, taking into account the percentage decrease and the resulting increase in contributions required to meet the affordability standard. Some employers might face dilemmas because they had intentions of adding extra benefits to their package, contemplating wage increases for certain employees, or reducing their contributions. To offer the best possible benefits at a reasonable cost, employers may need to reconsider their earlier plans based on this new affordability threshold. Determining new health plan premium contributions for the 2024 plan year will demand careful consideration from employers aiming to maintain a comprehensive benefits package while not straining their finances.
Brookshire Benefits: Your Trusted Partner for Managing Regulatory Change
Brookshire Benefits is your trusted partner in navigating the intricate landscape of upcoming changes, providing tailored consultations to address the unique implications for every employer. Our commitment to compliance is unwavering, with all clients undergoing a rigorous annual compliance check at each renewal. For those renewing in 2023, the current 9.12% affordability calculation remains in effect. However, it’s vital to note that starting on January 1, 2024, employers will be subject to the new ACA affordability percentage threshold of 8.39%. Count on Brookshire Benefits to guide you through these critical transitions and ensure you navigate the changing regulations effectively.