By Christy Abend
Revenue Service has updated the revenue procedure which indexes
the health plan contribution percentage required by employers when
determining whether an employer’s plan is considered affordable under
the Affordable Care Act (ACA). With penalties for noncompliance
rising, it is vital employers pay close attention to the changing
parameters around ACA regulations. As the 2022 reporting season ramps
up, all eyes should be on ACA requirements and regulations for 2023.
The IRS has recently updated their Affordable
Care Act Questions and Answers page, question 55, which
indicates that for 2023, noncompliance for Penalty A is $2,880
($240/month), and for Penalty B it is $4,320 ($360/month). The rising
cost of noncompliance should serve as a further incentive for
employers to examine their group health plan offerings to help ensure
broad enough coverage to full-time employees with at least one
self-only option that is affordable and provides minimum value benefits.
Secondly, the affordability threshold – used for employer
shared responsibility to determine whether employer-sponsored health
coverage is considered affordable – is 9.12% for 2023, a decline
from 9.61% in 2022.
These percentages are used to determine the amount of
household income eligible individuals can contribute toward the cost
of coverage in order for coverage to be considered affordable. These
changes affect how much employers can charge for health coverage for
2023 and how much in penalties employers can be assessed through
Employer Shared Responsibility Payments.
The IRS has decreased
the ACA affordability percentage for 2023. This percentage is
important when setting employer contributions for self-only coverage
for plans beginning on or after January 1, 2023. Coverage will be
considered affordable if an employee’s required contribution for
self-only coverage does not exceed 9.12% of their household income.
Employers who are out of compliance are subject to increased IRS penalties.
Employers currently charging employees the maximum allowable
amount while maintaining affordability status will need to consider
the new 2023 affordability percentage when establishing cost sharing
for the upcoming plan year.
Employers must continue to provide affordable
coverage that provides minimum value to 95% of full-time
employees for each calendar month of the year.
Employers must continue to meet employer mandate
requirements by managing employee eligibility.
Forms 1094 and 1095 must be completed accurately and
employees must be provided with information (Form 1095) in a
Applicable Large Employers (ALEs) must provide individual
statements to recipients no later than March 2, 2023 for the 2022
reporting year. ALEs must also file all applicable reports with the
IRS no later than February 28, 2023 (if filing by paper), or no later
than March 31, 2023 (if filing electronically). Of note: electronic
filing is mandatory for ALEs filing 250 or more forms.
Notes for controlled groups: All
companies in a controlled group are considered a single employer
for ACA reporting, this includes companies with multiple common
ownership or parent-subsidiary relationships. This applies to many
employee benefits laws, such as anti-discrimination and the ACA.
Employer shared responsibility rules discourage employers from
setting up multiple companies to avoid meeting the ALE status
requirement. Making sure all entities in a group are meeting ACA
regulatory requirements is vital to helping avoid penalties.
The IRS continues to assess potential penalties from
previous reporting years. IRS penalties are often attributed to:
Failure to file
Failure to meet the 95% threshold for full-time employees
who didn’t receive affordable coverage
Met the 95% threshold but failed to offer affordable
coverage to a benefits eligible employee who received
coverage and was eligible for a premium subsidy through the
With the stakes higher in 2023, it’s critical that your
organization maintains ACA regulatory requirements. Having C-suite
support can help HR teams put initiatives in place to help meet these
requirements, so it’s important the C-suite understands the risks in
the coming year. This
strategic information was developed as a blueprint for these