The 2023 affordability percentage that Applicable Large Employers (ALEs) use when determining whether their offer of coverage is affordable such that they are not subject to 4980H(b) penalty exposure is 9.12 percent of household income, down from 9.61 percent in 2022. Thus, for plan years beginning in 2023, ALEs offer affordable coverage if the employee required contribution amount for self-only, minimum value coverage does not exceed 9.12 percent of household income.
For ALEs with non-calendar year plans, they will reference the 2022 affordability percentage (9.61 percent) during the months of the 2023 calendar year that are included in a plan year that begins in the 2022 calendar year. For example, an ALE with a July 1 plan year would reference 9.61 percent for January 1, 2023 – June 30, 2023, and 9.12 percent for July 1, 2023 – December 31, 2023.
The IRS has been requiring some ALEs to prove that they satisfied the affordability safe harbor code reported on a Form 1095-C when proposing employer shared responsibility penalties in 226J letters. It is critical that ALEs understand how these calculations work so that they are prepared to respond. If you have questions about affordability calculations, we have resources to assist. Contact ETC Companies at email@example.com.