Employers Affected by Lower ACA Affordability Percentage
Employers may have to increase the amount they contribute toward employee health premiums in 2023, as the newly announced Affordable Care Act (ACA) affordability percentage significantly decreases the employee contribution threshold.
According to Internal Revenue Service (IRS) Revenue Procedure 2022-34, the ACA affordability percentage for 2023 is set at 9.12%, marking the lowest rate since the inception of the ACA employer mandate. This latest affordability is marginally lower than 2022’s 9.61%, meaning that employees will be required to pay a smaller percentage towards their monthly medical premiums.
The employer shared responsibility provision came into play with the passage of ACA, giving applicable large employers (ALEs) the option to offer affordable minimum essential coverage or potentially owe an employer shared responsibility payment to the Internal Revenue Service (IRS). ALEs wishing to avoid paying the penalty (Pay for Play Penalty) must ensure their coverage is in line with the ACA affordability percentage.