Drafted by Elizabeth Raggio, JD

The IRS has lowered the affordability percentage again – from 9.12% to 8.39% for plan years beginning in 2024. Meaning, Applicable Large Employers (ALEs) will continue to shoulder a greater burden of the employee premium for self-only coverage or face exposure to an employer shared responsibility payment (ESRP). 

To better understand the impact of this change, consider an ALE using the Rate of Pay Affordability Safe Harbor for employees earning $15 per hour. In 2024, this ALE must lower the cost of self-only coverage to these employees by almost $24 compared to what it charged in 2022, as shown in the table below. If 100 eligible employees paid at this rate took coverage, this ALE would be contributing almost $2,400 more towards coverage over that same time period, without also considering increases in premiums from carriers or TPAs that likely also occurred over this period. 

Table 1. Employee Required Contribution Amount under Rate of Pay Affordability Safe Harbor for employee earning $15 per hour

Plan YearAffordability PercentageEmployee Monthly Premium for Self-Only Coverage 

According to the Kaiser Family Foundation, the average monthly premium of single group coverage has steadily increased over the past several years. In the Employer Health Benefits Surveys published for the 2020-2022 calendar years, the average monthly premium was $623 in 2020, $645 in 2021, and $659 in 2022.

As ALEs prepare for offering coverage in 2024, they must consider these updated affordability percentages. ALEs who fail to offer affordable coverage to a full-time employee receiving subsidize Exchange coverage will be liable for an ESRP of $4,460 in 2024 ($371.67 per month) for that same employee.

Source: IRS Rev. Pro. 2023-29, available at: https://www.irs.gov/pub/irs-drop/rp-23-29.pdf