2024 ACA Employer Shared Responsibility – Affordabilty Criteria

Background. Under the ACA, contribution percentages are used to determine: (i) whether an Applicable Large Employer (“ALE”) is subject to the ACA’s employer shared responsibility penalty for failing to provide full-time employees with affordable coverage that has “minimum value”; (ii) whether an individual is exempt from the ACA’s individual mandate penalty (if it is reinstated by Congress) due to lack of access to affordable coverage; and (iii) the amount of an eligible taxpayer’s ACA premium tax credit.

NOTE: ALEs are employers that had 50 or more full-time equivalent employees during the preceding calendar year.

The ACA provides that an ALE’s coverage is affordable if the employee’s required contribution for self-only coverage does not exceed a certain percentage of the employee’s household income (as determined under IRS guidelines) for the tax year. ALEs that fail to provide affordable coverage are liable for a penalty of $3,000 per year (as indexed) for each full-time employee who receives a premium tax credit through an ACA Marketplace. 

Revenue Procedure 2023-29. For 2024, the required contribution percentage for ALEs has decreased to 8.39% (down from 9.12% for 2023). This means that if an employee’s share of the premium for employer-provided coverage for 2024 is more than 8.39% of her or his household income, the coverage is not considered affordable for that employee and the ALE may be liable for a penalty if that employee obtains a premium tax credit through a Marketplace.

Revenue Procedure 2023-29 is available at https://www.irs.gov/pub/irs-drop/rp-23-29.pdf.