2023 “Affordability” Percentage

Benefit Comply can review your reporting to help identify where there a risk of penalty under §4980H (the “employer mandate”). More Info >

In Revenue Procedure 2022-34, the IRS significantly decreased the affordability percentage from 9.61% to 9.12% for 2023. This percentage determines which applicable large employers may face penalties under §4980H(b) for failure to offer affordable coverage as well as which individuals may qualify for subsidized coverage through a public Exchange.

Revenue Procedure 2022-34 – https://www.irs.gov/pub/irs-drop/rp-22-34.pdf

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. 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 –Effective January 1, 2023, employer plan affordability for family members will be based on the required cost for the family to participate in the employer-sponsored plan, but affordability for the employee will still be based on the employee’s cost for single (employee-only) coverage. In addition, an applicable large employer will continue to meet §4980H(b) requirements if single coverage is made affordable; there is no requirement for an employer to make coverage affordable for family members.

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). Effective for plan years beginning on or after January 1, 2023, the percentage to be used in affordability calculations is 9.12%. For calendar year plans, 9.12% applies beginning in January 2023, but for a non-calendar year plan that renews in September, 9.12% applies beginning in September 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).