Employers preparing for open enrollment in 2024 should take note that the Affordable Care Act (ACA) affordability safe harbors are set to decrease. The Internal Revenue Service (IRS) recently released
Revenue Procedure 2023-29, an official document announcing that the ACA affordability threshold will be reduced to 8.39 percent for 2024, a drop from the previous 9.12 percent for 2023.
The implications of this change are significant as it is likely to lower the amount of premiums an employee can be required to pay by their employer, mitigating the risk of potential penalties. This change, noted in an article on
JD Supra, signifies a more stringent affordability test for employers.
Under the ACA, employers are required to offer health coverage that meets specific minimum value and affordability standards. If they fail to meet these conditions, they may face substantial penalties. This rule applies to large employers with 50 or more full-time or full-time equivalent employees.
While it remains unclear how this change will ultimately play out and impact corporations, all eyes will be on the fine print as employers work to ensure that their health plans comply with the new thresholds. All employers, particularly those of large corporations and law firms, are advised to consult with legal and tax professionals in advance of the approaching open enrollment period in order to better plan and prepare.