Compliance Corner: 2024 Affordability Threshold Lowered to 8.39 Percent

This information applies to groups that are Applicable Large Employers (ALE) defined by the Affordable Care Act as an employer averaging 50 or more full-time equivalent employees. See below for a step-by-step guide that will help you determine if you are an ALE.

Large employers have a federal mandate to provide coverage, submit government reporting, and to ensure that employee premium cost for coverage doesn’t exceed certain amounts or they will be subject to penalties. The cost of coverage limitations is called the Affordability Threshold. It is indexed annually by the IRS.

The new Affordability Threshold percentage has been lowered to 8.39 percent and applies to plan years beginning January 1, 2024, for ALEs. The IRS indexes this amount annually based on a combination of factors including premium cost increases in relation to income growth rates.

The IRS issued Revenue Procedure 2023-29 announcing the decrease in the amount that employers can charge employees for their health coverage.

If you have any additional questions, please don’t hesitate to reach out to your ARC representative.

How to Tell if You Are an Applicable Large Employer

A lot of employers don’t realize that part-time or what they consider to be “seasonal” workers can place your group into ALE Status. IRS Control Groups also have to include all groups to arrive at their total headcounts.

Here’s a quick reference to assess if you’re subject to the ACA’s “Pay or Play” rules:

• Step 1: Check with your payroll vendor or software to see if they have a tool or report to make this determination. If not, proceed to the next step.
• Step 2: Count the number of employees working 30 hours or more per week per month over the last 12 months.
• Step 3: For anyone averaging less than 30 hours per week, total all hours by month and divide each month by 120.
• Step: Add the sum of Step 1 and Step 2 by month and then average the months.

If the average is 50 or more employees, your group may be subject to the ACA requirements for ALEs.

If your group is nearing 50 employees, it’s good to assess the requirements before you have to meet them. Your ARC advisor can provide support for this when you’re ready.

For more information on ALE compliance, please contact your ARC Client Advisor. We can assist with strategies to meet the Affordability Threshold.