The percentage for determining the affordability of employer-sponsored health coverage under the Affordable Care Act (ACA) will increase for plan years starting in 2025 to 9.02% (up from 8.39% for plan years starting in 2024), the IRS announced in Revenue Procedure 2024-35.
An employer with 50 or more full-time employees and full-time employee equivalents (i.e., an applicable large employer or ALE) must offer minimum essential health coverage that is both affordable and provides minimum value to its full-time employees and their eligible dependents. To meet the affordability requirement, the employee contribution for the lowest cost health benefit option offered by the employer must be no greater than 9.02% (for plan years beginning in 2025) of the full-time employee’s household income.
In lieu of requiring employers to calculate each full-time employee’s household income for the year to determine affordability, the IRS allows the use of three affordability safe harbors:
The FPL safe harbor is determined by multiplying the affordability percentage by the applicable FPL threshold and dividing that product by 12. The 2025 FPL threshold has not yet been released by the U.S. Department of Health and Human Services.
Using the current 2024 FPL threshold for purposes of illustration, if an employer with a calendar-year plan is using the FPL affordability safe harbor for the 2025 plan year, an employee’s contribution (for those employees working in the continental U.S.) cannot exceed 9.02% of $15,060 divided by 12 months or $113.20 per month.
Note that employers may use the FPL guidelines in effect within six months before the first day of the plan year. So, for certain non-calendar-year plans in 2024 (for example, a plan with a September 1 plan year), the FPL safe harbor would be determined by multiplying 9.02% by the applicable FPL threshold within six months and dividing that product by 12. For example, in 2024 the amount for a September 1, 2024 plan year would have been $105.29 per month for the continental U.S. (8.39% of $15,060 divided by 12 months).
