Affordable Care Act (ACA) Affordability Percentage Lowered to 8.39%

The Affordable Care Act (ACA) affordability percentage has been lowered to 8.39% in 2024, down from 9.12% in 2023. It’s the largest decrease since the ACA’s inception and has implications for Applicable Large Employers (ALEs) and their healthcare options. Remember that an ALE is an employer with at least 50 full-time equivalent employees in the previous calendar year.

The ACA affordability percentage is intended to ensure that employees have access to affordable healthcare coverage, and represents the threshold where coverage is considered to be affordable. That means that in 2024, healthcare coverage is considered to be affordable if it does not exceed 8.39% of an employee’s household income. Covered employers must now assess their healthcare options so that they comply with the employer mandate to avoid fines and legal trouble.

According to SHRM, the employer share responsibility penalties apply if “employer-sponsored coverage is determined to be unaffordable or does not provide minimum value, and if one or more full-time employees receive subsidized coverage through an exchange.” Penalties are significant and employers should do everything they can to maintain compliance.

The Employer Shared Responsibility requirements two penalties are below, each with their own amounts. For 2024, the penalties are as follows:

1. 4980H(a)
   1. This penalty, part of the Employer Shared Responsibility Payment, is for ALEs who don’t offer minimum essential healthcare coverage (MEC) to their full-time employees (FTE).
   2. The penalty amount is $2,970 annually for each FTE, minus the first 30 FTEs.
2. 4980H(b)
   1. Another penalty included in the Employer Share Responsibility Payment, is for ALEs who offer healthcare coverage to their FTEs but the coverage doesn’t meet the affordability threshold or is determined to be inadequate.
   2. The penalty amount is $4,460 annually for each FTE who receives healthcare coverage subsidy through an exchange.