IRS Releases 2023 ACA Affordability Rate

Employer sponsored health coverage for a 2023 calendar plan year will be considered affordable if the employee required contribution for self-only coverage does not exceed 9.12% of the employee’s household income for the taxable year. This is a decrease from the 2022 rate of 9.61%. The rate was published in IRS Revenue Procedure 2022-34.

How to Calculate ACA Affordability in 2023

Since employers generally do not know an employee’s household income, the IRS provides three affordability safe harbors that applicable large employers (ALEs) may use to determine affordability. The safe harbors permit an ALE to measure affordability based on one of the following:

a) Form W-2 Wages,
b) Rate of Pay, or
c) Federal Poverty Level. (FPL).

Calculating Affordability Using the FPL Safe Harbor

The FPL Safe Harbor is the easiest to calculate. For 2023 calendar year plans, the FPL Safe Harbor is satisfied, if the required monthly employee contribution for self-only coverage does not exceed 9.12% of the federal poverty line divided by 12. The 2023 poverty level guidelines will not be available until the end of January or later, therefore IRS guidance allows employers to use the poverty guidelines in effect within six months prior to the first day of the employer’s plan year. This means an employer with a January 1, 2023 plan year start may use the 2022 federal poverty guideline amount to determine the 2023 ACA Federal Poverty Level (FPL) Safe Harbor monthly threshold amount.

Additional information about other safe harbors are available on the IRS website:

• Minimum Value and Affordability
• Minimum Value and Affordability FAQs