Under the Affordable Care Act (ACA), applicable large employers (ALEs) — i.e., those with, on average, fifty (50) or more full-time or full-time-equivalent employees in the preceding year — must offer in the following year affordable, minimum value group health plan coverage to their full-time employees and those employees’ dependents or risk imposition of ACA penalties. Affordability is determined by using the employee’s premium for the lowest-cost employee-only coverage under the employer’s plan. The coverage is affordable if the employee premium for this coverage is 9.5% (as adjusted) or less of the employee’s household income.

Recognizing that employers might have a very difficult — if not impossible — time determining full-time employee household income, the ACA employer mandate final regulations set forth three (3) safe harbor proxies for employee household income that employers can select from to make affordability determinations:  the federal poverty line, W-2 wages, or rate of pay.

In the recently issued Rev. Proc. 2023-29, the Internal Revenue Service announced the affordability percentage that will apply for plan years beginning in 2024:  8.39%. This percentage is a notable reduction from the previously applicable 9.12% for 2023 and is the lowest applicable percentage since the employer mandate’s inception.

With open enrollment for calendar year plans just around the corner, ALEs should take immediate steps to make sure their offers of coverage for 2024 will satisfy the new affordability percentage.

If you have questions concerning the affordability percentage or any other aspect of the ACA, the Jackson Lewis Employee Benefits Practice Group members are available to assist. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

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Photo of Stephanie O. Zorn Stephanie O. Zorn

Stephanie O. Zorn is a principal in the St. Louis, Missouri, office of Jackson Lewis P.C.

Stephanie has over twenty years of experience representing management in employee benefits and employment matters, both as in-house counsel and in private practice.

Stephanie is co-lead of…

Stephanie O. Zorn is a principal in the St. Louis, Missouri, office of Jackson Lewis P.C.

Stephanie has over twenty years of experience representing management in employee benefits and employment matters, both as in-house counsel and in private practice.

Stephanie is co-lead of the firm’s Transactional Services group and spends a substantial amount of her practice assisting clients with the employment and employee benefits matters implicated in mergers and acquisitions, with a special focus on clients in the private equity, technology, consumer goods, manufacturing and healthcare sectors. Stephanie leads due diligence review, the drafting and negotiation of definitive deal documents, insurer and co-investor interface and closing and post-closing business integrations.

Stephanie’s employee benefits practice includes assisting clients with all aspects of a broad range of plans including retirement plans, health and welfare plans, nonqualified plans, executive compensation plans, severance plans and voluntary early retirement plans. Stephanie also defends plans and plan administrators in disability, group health plan and life insurance claim litigation including ERISA section 502(a)(1)(B) and (a)(3) claims. Stephanie’s practice also includes counseling clients on Internal Revenue Code, ERISA, COBRA, ACA, HIPAA and fiduciary compliance including investment selection, service provider reviews and plan committee issues.

Stephanie’s employment practice consists of counseling employers in connection with discrimination, harassment, disability accommodations, family and medical leave and wage and hour matters. Stephanie also assists clients with reductions in force and reorganizations, noncompete and confidentiality agreements, retention agreements, service provider classification, outsourcing and international labor and employment matters.