IRS Announces 2023 ACA Affordability Safe Harbor - Bim Group

IRS Announces 2023 ACA Affordability Safe Harbor

READ TIME: 3 MINUTES

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to make an offer of group health coverage to at least 95% of its full-time (i.e., regularly working at least 30 hours per week) employees or pay a shared responsibility penalty assessed by the IRS if at least one employee gets a premium tax credit (PTC) for Marketplace coverage. The ACA also mandates that ALEs who offer group health coverage must make sure the coverage is affordable and provides minimum value or pay a separate shared responsibility penalty for any individual who receives a PTC for Marketplace coverage.

The ACA provides that if the lowest-cost single only coverage offered to an employee does not exceed a threshold percentage of his or her household income, the Internal Revenue Service (IRS) will deem the coverage affordable. The ACA originally set the affordability percentage at 9.5%, but the IRS adjusts the amount based on medical inflation annually. The IRS recently announced that the 2023 ACA affordability threshold will decrease to 9.12%.

Historically, the affordability threshold has risen more often than it has fallen. The significant drop in the threshold for 2022 means employers must cautiously set the cost for 2023 coverage at a low enough level to avoid more employees triggering a potential shared responsibility penalty. The new threshold applies for plan years (including non-calendar year plans) that start on or after January 1, 2023.

 

 

This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

Recent Insights

September 28, 2022
Compliance Alert

Departments Issue No Surprises Act FAQ and Clarify Independent Dispute Resolution Process

READ TIME: 6 MINUTES The U.S. Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) recently released final rules regarding the No Surprises Act. The rules specifically address required independent dispute resolution (IDR) of certain claims and expenses and finalize prior interim final rules relating to information that group health plans must […]
Read more
September 28, 2022
Webinar

Webinar: Navigating Tax-Favored Accounts and Consumer-Driven Health Care

Tuesday, October 11, 2022 1 – 2PM CST Register Now Learn the similarities and distinctions between the many tax-favored accounts available to employer groups and their interaction with a high deductible health plan (HDHP). Learn the advantages and disadvantages to employees and employers of the: Flexible spending account (FSA) Health reimbursement arrangement (HRA) Health saving […]
Read more
September 6, 2022
No Surprises Act

Departments Issue Final Rules to Clarify Dispute Resolution and Transparency under the No Surprises Act

READ TIME: 6 MINUTES On August 19, the U.S. Departments of Health and Human Services, Labor, and the Treasury (the Departments) released final rules regarding the No Surprises Act provisions of the Consolidated Appropriations Act, 2021. The rules address the No Surprises Act’s required independent dispute resolution (IDR) process and finalize prior interim final rules […]
Read more
September 6, 2022
Affordable Care Act (PPACA)

Important 2023 ACA Reminders for Applicable Large Employers

READ TIME: 4 MINUTES The Affordable Care Act (ACA) includes numerous requirements for applicable large employers (ALEs) to meet to maintain compliant group health plans. Many of these requirements change annually, so we provide you this overview of the key facts and figures to keep in mind for 2023. Affordability Threshold The ACA imposes an […]
Read more