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In Revenue Procedure , the IRS significantly decreased the affordability percentage from 9.61% to 9.12% for 2023.

Background

Under §4980H, applicable large employers (50 or more full-time equivalents (FTEs)) must offer coverage to full-time employees that is affordable to avoid potential §4980H(b) penalties.

Coverage is considered “affordable” under §4980H(b) requirements if the employee contribution 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 enrolling for coverage through a public Exchange will not qualify for subsidized coverage if they are eligible for employer-sponsored group health plan coverage that is affordable.

Coverage is generally considered “affordable” if the employee contribution for employee-only (single) coverage does not exceed a set percentage (9.12% in 2023) of household income.

• Note – Unless final rules are released yet this year indicating otherwise, coverage is considered affordable for dependents as well, regardless of the contribution amount, so long as the employee-only (single) coverage is affordable.

Required Contribution Percentage

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.

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Affordability Percentage	2018	2019	2020	2021	2022	2023
	9.56%	9.86%	9.78%	9.83%	9.61%	9.12%
FPL Affordability – Calendar Year Plan	$96.07	$99.75	$101.79	$104.52	$103.14	$103.28
FPL Affordability – Non-Calendar Year Plan	$96.71	$102.62	$103.99	$105.50	$108.83	TBD

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Application

For calendar year plans, 9.12% applies beginning in January 2023, but for a non-calendar year plan, 9.12% applies with the plan year beginning in 2023.

The decrease in the affordability percentage (from 9.61% in 2022 to 9.12% in 2023) may require employers to lower employee contributions for the 2023 plan year to meet the affordability requirements under §4980H(b).

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.