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Affordability Percentage Decreases for 2024

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1.5 minute read

The IRS recently announced the affordability percentage that will apply under the Affordable Care Act’s (ACA) pay or play rules for plan years beginning in 2024. Employer sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 8.39% of their annual household income.


Pay or Play Rules

Under the pay or play rules, applicable large employers (ALEs) must offer affordable, minimum-value health coverage to their full-time employees or be penalized. Coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5% (as adjusted) of their household income for the taxable year.


The Impact

For 2024, the affordability percentage has decreased to 8.39%. This is a substantial decrease, and the lowest this percentage has ever been set. As a result, many employers may have to significantly lower their employee contributions for 2024 to meet the adjusted percentage.

For employers with 50 or more full-time employees, at least one of the single-only health plans offered to full-time employees must satisfy the ACA’s affordability standard, or they risk a penalty if employees purchase a policy on the Marketplace.

Since employers won’t likely know an employee’s household income, the IRS has three optional affordability safe harbors that ALEs can use to determine affordability based on information they have: the Form W-2 safe harbor, the rate of pay safe harbor, and the federal poverty safe harbor.


Download the bulletin for more details.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Rick Labian

Rick Labian

Rick Labian lives by the Golden Rule – he is guided by what is best for his clients and treats others as he would like to be treated. Rick acts as an advisor and advocate for his clients, helping to identify goals for their benefit programs and building a strategic plan together. Rick has a rich history with NIS. He has worked for NIS for over 20 years, leading the Eastern region. Rick is the manager and leads the FBC Client Management Team. Rick’s leadership and experience aids our internal staff and all of NIS’ FBC clients. Rick is a licensed insurance agent and is ACA certified through the National Association of Health Underwriters.