IRS Announces 2024 Health Plan Affordability Threshold
- Falah Ahmad
- May 8
- 2 min read
The Internal Revenue Service (IRS) has announced a significant decrease in the Affordable Care Act (ACA) affordability threshold for the 2024 tax year. As per Revenue Procedure 2023-29, the new threshold is set at 8.39% of an employee’s household income, down from 9.12% in 2023. Trusaic+8Trusaic+8Trusaic+8
What This Means for Employers
Under the ACA's Employer Shared Responsibility Provisions, Applicable Large Employers (ALEs)—those with 50 or more full-time employees—are required to offer health coverage that is both affordable and provides minimum value to at least 95% of their full-time employees and their dependents. Failure to comply may result in penalties. Trusaic+2IRS+2Trusaic+2
With the lowered affordability threshold, employers must ensure that the employee's share of the premium for the lowest-cost, self-only coverage does not exceed 8.39% of their household income. This change necessitates a review and possible adjustment of employee contribution amounts to maintain compliance and avoid potential penalties.SHRM
Safe Harbor Methods for Determining Affordability
To simplify compliance, employers can use one of the following IRS-approved safe harbor methods to determine affordability:Verywell Health
W-2 Safe Harbor: Affordability is based on the employee's W-2 wages.
Rate of Pay Safe Harbor: Affordability is determined using the employee's hourly rate multiplied by 130 hours per month. For example, an employee earning $20/hour would have a maximum monthly contribution of approximately $218.14 ($20 × 130 × 8.39%). My Benefit Advisor+5Trusaic+5Trusaic+5
Federal Poverty Line (FPL) Safe Harbor: Affordability is assessed based on the federal poverty level guidelines.Verywell Health
Employers should evaluate which safe harbor method best suits their workforce to ensure compliance with the updated threshold.Trusaic
Looking Ahead to 2025
It's noteworthy that the IRS has announced an increase in the affordability threshold to 9.02% for the 2025 tax year, providing employers with more flexibility in structuring employee contributions. Trusaic+3Trusaic+3Calfee+3
Employers are encouraged to stay informed about these changes and adjust their health plan offerings accordingly to maintain compliance with ACA requirements.
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