The Federal Poverty Guideline (FPL) for 2025 has increased to $15,650, up from $15,060 in 2024. This adjustment plays a crucial role in ACA affordability calculations for employers using the Federal Poverty Guideline Safe Harbor. Understanding these changes is essential for ensuring compliance with affordability requirements under the Employer Mandate.

FPL Safe Harbor: How It Works

The FPL Safe Harbor is a method employers can use to determine whether their lowest-cost, self-only medical plan meets the ACA’s affordability requirement. Under this safe harbor, a plan is considered affordable if the employee’s monthly premium cost does not exceed 9.02% of the FPL.

The affordability threshold is calculated using the following formula:

Monthly Safe Harbor Amount = (9.02% x Federal Poverty Level) ÷ 12

Using this formula, here’s an example of how the 2025 FPL Safe Harbor amount is determined:

• 9.02% of $15,650 (2025 FPL) = $1,411.63
• $1,411.63 ÷ 12 = $117.64 (rounded to the nearest penny)

Calendar Year Plans vs. Non-Calendar Year Plans

Employers can use the federal poverty guidelines from six months before the start of their plan year to calculate affordability. Since the updated FPL is usually released after the new year, calendar year plans (starting January 1) rely on the prior year’s FPL to set premiums in advance for open enrollment.

Here’s how this works in practice:

• Calendar Year Plans (Starting January 2025)
  • These plans may use the 2024 FPL ($15,060) to determine affordability
  • Example: 9.02% x $15,060 (2024 FPL) = $1,358.12
  • The maximum monthly employee contribution for self-only coverage must not exceed $113.20 ($141.38 for Alaska and $130.11 for Hawaii)
• Non-Calendar Year Plans (Starting February – June 2025)
  • Option may use either the 2024 or 2025 FPL for affordability calculations
  • Using the higher 2025 FPL ($15,650) allows for a slightly higher contribution limit, which can be beneficial for employers
• Non-Calendar Year Plans (Starting July – December 2025)
  • These plans must use the 2025 FPL ($15,650) to determine affordability.
  • The maximum monthly employee contribution for self-only coverage must not exceed $117.64 ($146.95 for Alaska and $135.22 for Hawaii).

Key Takeaways for Employers

• Higher FPL = Higher Employee Contribution Limit – The increase in the FPL from 2024 to 2025 allows employers using the FPL Safe Harbor to slightly increase employee contributions while remaining compliant
• Plan Accordingly – Employers should review their plan contribution strategies to ensure they meet the FPL Safe Harbor while maintaining compliance with ACA affordability rules

Understanding these updates will help employers navigate ACA compliance and ensure they offer affordable health coverage to full-time employees under the Employer Mandate.

The advantage of using the Federal Poverty Guideline safe harbor is that affordability is never at issue since it is not based on the employee’s actual income.  The drawback is that the employer contribution is higher than it would be if the rate of pay or W-2 safe harbors are used.

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