This week the IRS issued Revenue Procedure 2022-34, which significantly decreases the affordability threshold for ACA employer mandate purposes to 9.12% for plan years beginning in 2023. Where possible within budgetary constraints, employers should prepare to offer at least one medical plan option to full-time employees in all regions with an employee-share of the premium not exceeding $103.28/month for employee-only coverage to simplify affordability compliance under the federal poverty line safe harbor.Ģ023 Affordability Percentage Set at 9.12% 2023 Contribution Strategy Considerations: Consider the ACA affordability safe harbor requirements when designing 2023 employee contribution levels to avoid potential employer mandate “B Penalty” liability.While the calculation is straightforward and mostly routine now, employers should prepare early to avoid being caught off guard by the increased employer contributions required to keep the plan affordable at the much lower 9.12% rate for 2023. This approach applies an analysis of the lowest hourly rate of pay for hourly full-time employees and the lowest monthly salary for salaried full-time employees. 2023 Lowest-Cost Plan Exceeds $103.28/Month (Rate of Pay Affordability Safe Harbor): Employers that do not offer a medical plan option meeting the 2023 federal poverty line affordability safe harbor (i.e., the lowest-cost plan option at the employee-only tier costs employees more than $103.28/month) should generally utilize the rate of pay affordability safe harbor.2023 Lowest-Cost Plan is No More Than $103.28/Month (Federal Poverty Line Affordability Safe Harbor): Employers with a calendar plan year offering a medical plan option in 2023 that costs employees no more than $103.28 per month for employee-only coverage will automatically meet the ACA affordability standard under the federal poverty line affordability safe harbor that deems coverage affordable for all full-time employees (and permits the employer to use qualifying offer method for streamlined ACA reporting).2023 ACA Affordability Percentage (Large!) Decrease to 9.12%: The IRS has announced that the ACA affordability percentage used to determine compliance with the employer mandate will decrease dramatically from 9.61% in 2022 to 9.12% in 2023 (by far the lowest level to date) of the employee’s household income, as determined under one of the safe harbor approaches.Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.Īmeriprise Financial Services, LLC. Consumers should consult with their tax advisor or attorney regarding their specific situation. and its affiliates do not offer tax or legal advice. Please seek the advice of a financial advisor regarding your particular financial situation.Īmeriprise Financial, Inc. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor. It is given as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned. This information is provided third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial.
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