By Christy Abend
The IRS recently announced the 2025 ACA affordability percentage, increasing from 8.39% of an employee's household income in 2024 to 9.02% in 2025*. The affordability percentage is used to determine whether or not an employee is being offered affordable coverage through their employer, and therefore, whether or not they are eligible for a premium tax credit when purchasing coverage through the exchange. This change is important for employers to be aware of as it directly impacts the affordability of employer-sponsored health coverage and has implications for both employees and employers.
This announcement comes at a crucial time for employers as many are in the midst of their open enrollment and cost-sharing strategy exercises for the upcoming calendar year. It's imperative that employers understand the new affordability percentage and adjust their health plan offerings and cost-sharing accordingly to help meet regulatory requirements with the ACA and help avoid potential penalties.
To determine affordability, employers can utilize one of three safe harbors:
Each safe harbor has its advantages and disadvantages:
An employee in the 48 contiguous states and D.C. is offered a health plan with a total monthly premium of $500 for self-only coverage. To meet the FPL safe harbor, the employer's contribution must be at least $386.80 per month ($500 - $113.20).
The official 2025 FPL rate won't be published until early 2025. Employers can use the 2024 FPL rate through July 2025*. However, it's advisable to plan for the potential increase in the FPL and adjust employee contributions accordingly to help you better ensure your ongoing ACA requirements are met.
Understanding and navigating the complexities of ACA requirements can be challenging. It's essential to stay informed about regulatory changes and proactively adjust your health plan offerings to better protect both your employees and your business.
Equifax Workforce Solutions offers a more comprehensive ACA solution, including affordability calculations, reporting, and consulting services. We can help you navigate the intricacies of ACA and help ensure you're better prepared for the 2025 plan year.
Contact us today to learn more.
*Source: Internal Revenue Service
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