resources
IRS Releases 2024 ACA Affordability Rate
August 29, 2023
What is the 2024 ACA Affordability Rate?
Employer sponsored health coverage for a 2024 calendar plan year will be considered affordable if the employee required contribution for self-only coverage does not exceed 8.39% of the employee’s household income for the taxable year. This is a decrease from the 2023 rate of 9.12%. The rate was published in IRS Revenue Procedure 2023-29.
Learn More: ACA Compliance Guide for Employers
Calculating Affordability
Because employers generally do not know an employee’s household income, the IRS provides three affordability safe harbors that applicable large employers (ALEs) may use to determine affordability. The safe harbors permit an ALE to measure affordability based on one of the following:
- Form W-2 Wages,
- Rate of Pay, or
- Federal Poverty Level (FPL).
Calculating Affordability Using the FPL Safe Harbor
The FPL Safe Harbor is the easiest to calculate. For 2024 calendar year plans, the FPL Safe Harbor is satisfied, if the required monthly employee contribution for self-only coverage does not exceed 8.39% of the federal poverty line divided by 12. The 2024 poverty level guidelines will not be available until the end of January or later, therefore IRS guidance allows employers to use the poverty guidelines in effect within six months prior to the first day of the employer’s plan year. This means an employer with a January 1, 2024 plan year start may use the 2023 federal poverty guideline amount to determine the 2024 ACA Federal Poverty Level (FPL) Safe Harbor monthly threshold amount.
2023 Poverty Level Guidelines Individual | 2024 Safe Harbor 8.39% Monthly Threshold |
Federal: $14,580 | $101.94 |
Additional information about the other safe harbors can be accessed on the IRS website:
Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.
Keep Up With Compliance
Between constantly changing employment laws and updates to the Affordable Care Act (ACA), keeping your workplace compliant can be a time-consuming and costly challenge. Eliminate the stress and stay up to date with our Compliance Dashboard. View compliance alerts and get a bird’s eye view of what you need to do to avoid fines and penalties.
