The IRS recently announced in Revenue Procedure 2022-34 that the Affordable Care Act (“ACA”) affordability indexed amount under the Employer Shared Responsibility Payment (“ESRP”) requirements will be 9.12% for plan years that begin in 2023. This is a notable decrease from the 2022 percentage amount (9.61%) and below the original 9.5% threshold.

Rev. Proc. 2022-34 establishes the indexed “required contribution percentage” used to determine whether an individual is eligible for “affordable” employer-sponsored health coverage under Section 36B (related to qualification for premium tax credits when buying ACA Marketplace coverage). However, the IRS explained in IRS Notice 2015-87 that a percentage change under Section 36B will correspond to a similar change for affordability under section 4980H ESRP requirements.

An employer will not be subject to a penalty with respect to an ACA full-time employee (“FTE”) if that employee’s required contribution for 2023 for the employer’s lowest cost self-only coverage complies with one of the safe harbors: the W-2 safe harbor, rate of pay safe harbor, and the Federal Poverty Level (“FPL”) safe harbor.

Employers budgeting and preparing for the 2023 plan year should review these affordability safe harbors when analyzing employee contribution amounts for the coming year.

Any questions or concerns regarding this notice? Please contact your Total Benefit Solutions, Inc health insurance specialists at (215)355-2121.