Affordability Increasing to 9.02 Percent
· Sep 10, 2024
In Revenue Procedure 2024-34, the IRS increased the affordability percentage from 8.39% to 9.02% for 2025.
Under §4980H, applicable large employers (50 or more full-time equivalents or FTEs) must offer full-time employees affordable, minimum value (MV) medical coverage to avoid potential §4980H(b) penalties.
Coverage is considered “affordable” under the §4980H(b) requirements if the employee contribution for the lowest-cost single MV plan satisfies at least one of three available safe harbors (i.e., federal poverty level (FPL), rate of pay, or Form W-2).
In addition, individuals eligible for employer-sponsored group health plan coverage that is affordable will not qualify for a public health Exchange Marketplace tax credit that could potentially trigger an employer penalty. Coverage is generally considered “affordable” if the employee contribution for employee-only (single) coverage does not exceed a set percentage of household income.
Originally, for 2014, the required contribution percentage for determining affordability was set at 9.5%. The percentage is adjusted annually. See applicable percentages for several years in the table below, along with the dollar thresholds for single coverage to be FPL affordable those years.
2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
---|---|---|---|---|---|---|
Affordability Percentage | 9.78% | 9.83% | 9.61% | 9.12% | 8.39% | 9.02% |
FPL Affordability – Calendar Year Plan | $101.79 | $104.52 | $103.14 | $103.28 | $101.93 | $113.20 |
FPL Affordability – Non-Calendar Year Plan | $103.99 | $105.50 | $108.83 | $110.80 | $105.29 | TBD |
For calendar year plans, 9.02% applies beginning in January 2025, but for a non-calendar year plan, 9.02% applies with the plan year beginning in 2025.
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