The IRS has released notice 2023-29, which outlines the affordability percentage for 2024. Unfortunately, it's another big dip, and employers need to be aware of the implications. In 2022, we saw it at 9.61%, and in 2023, it dropped to 9.12%. Now, affordability for plan years commencing in 2024 will be based on 8.39% of their chosen safe harbor.
The three safe harbors are:
- Federal Poverty Guidelines
- Rate of Pay (based on 130 hours per month)
- W-2 (what appears in Box 1 of the W-2 for tax year 2024)
This means that affordability will be a challenge for employers in 2024. Applicable Large Employers (ALEs) will have to adjust the employee's contribution for single coverage only for the lowest cost plan that meets minimum actuarial value accordingly unless they want to face a potential employer shared responsibility penalty. For example, if an employer chooses the Federal Poverty Guidelines safe harbor, the maximum monthly employee contribution for 2024 will be $101.94. If the employer offers a plan with a premium that exceeds this amount, the plan will be considered unaffordable, and the employer may face penalties.
In conclusion, the IRS notice 2023-29 is an essential consideration for employers as they plan for the upcoming year. Employers must carefully review their plan offerings and employee contributions to ensure they meet the new affordability threshold. It's also important to communicate any changes to employees and provide them with resources to help them understand their coverage options. However, by staying informed and taking proactive steps, employers can ensure they remain compliant and provide their employees with quality, affordable coverage. As always, we are here to help ensure your ACA compliance! Medcom offers a variety of ACA services, including filing, tracking, penalty appeal support, and back filing. We have an expertly trained staff and the technology to help you navigate the confusing world of ACA regulations, so don't hesitate to contact us.
To read the full notice and for more information, check out https://www.irs.gov/pub/irs-drop/rp-23-29.pdf.