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Did you know failing to meet ACA affordability in 2024 could cost your business thousands of dollars in penalties? For businesses with an average of 50 or more full-time and full-time equivalent employees, also known as applicable large employers (ALEs), ensuring employee health insurance offerings meet the Affordable Care Act (ACA) affordability standards is crucial.
With the new ACA affordability percentage for 2024, it's essential to understand what this means for your business, how to remain compliant and the penalties for non-compliance. This guide will help you navigate these changes and show how partnering with a professional employer organization (PEO), like Axcet HR Solutions, can support your efforts.
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The ACA mandates that ALEs offer affordable health insurance to at least 95% of full-time employees (and their dependents) that is both affordable and meets minimum essential coverage standards – or face a potential penalty.
The 2024 ACA affordability percentage is a critical component of this requirement and can change annually based on inflation and economic conditions.
The 2024 ACA affordability percentage has decreased to 8.39% of an employee's household income. This means the employee's contribution for self-only coverage should not exceed 8.39% of the employee’s household income for the taxable year.
Because employers have no actual way to calculate an employee’s household income, the IRS provides three affordability safe harbors:
Use the employee’s wages from Box 1 of their W-2 form. Under this method, the monthly premium for self-only coverage must not exceed 8.39% of the employee's W-2 Box 1 wage.
This method uses an employee’s regular rate of pay to gauge affordability. To qualify, the monthly premium for self-only coverage must not exceed 8.39% of either:
This method uses the federal poverty line for a single individual. For 2024, the employee’s share cannot exceed 8.39% of the federal poverty line, or $15,060 ($105.29 per month).
It’s important to note that employers are permitted to use the federal poverty guidelines in effect six months prior to the beginning of the plan year to calculate affordability.
So, affordability calculation under the Federal Poverty Line Safe Harbor may be completed in two different ways:
Penalties for Non-Compliance with ACA Affordability GuidelinesALEs who fail to offer minimum essential coverage to at least 95% of their full-time employees and their dependents, offer coverage that is not affordable or fail to provide minimum value may be subject to penalties.
For 2024, the penalties include:
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To stay compliant, ALEs should:
Apply one of the three IRS safe harbor methods consistently for all employees.
Navigating ACA compliance can be complex, but partnering with a PEO like Axcet HR Solutions offers significant advantages:
Axcet’s HR professionals are well-versed in ACA regulations and can help ensure your business remains compliant.
At Axcet, we partner with United Healthcare and other major carriers to offer a broad portfolio of health plans, providing you with unparalleled options and flexibility.
Axcet handles all plan administration including paperwork, renewals, plan selection and administrative tasks, allowing you to remain compliant while focusing on running your business.
As a certified PEO, we pool our clients’ employees into a single group to create bargaining power with insurance providers, giving smaller companies access to better coverage at lower rates.
As an ALE, ensuring your business' health insurance meets ACA affordability for 2024 is crucial to avoid penalties and remain compliant. By understanding the 2024 ACA affordability percentage, calculating affordability correctly and taking advantage of the expertise and resources offered by a PEO like Axcet HR Solutions, you can protect your business and provide valuable benefits to your employees.
Failing to meet ACA affordability standards in 2024 could expose your business to thousands in penalties—but you don’t have to navigate it alone. As a certified PEO, Axcet HR Solutions helps applicable large employers simplify ACA compliance, optimize employee benefits plans, and protect their bottom line.
From safe harbor calculations to full benefits administration, our experts handle the details so you can stay focused on your business.
Let’s make ACA compliance easy. Schedule a consultation with Axcet today »
Written by
Jeanette Coleman, SPHR, SHRM-SCP, is the Director of Human Resources at Axcet HR Solutions, where she has contributed her expertise for over 21 years.
As a leader in the HR industry, she holds advanced certifications as a Senior Professional in Human Resources (SPHR) and SHRM-Senior Certified Professional (SHRM-SCP). Jeanette oversees HR strategy and operations, ensuring Axcet delivers exceptional HR services that help small and mid-sized businesses stay compliant and grow.
With a Master’s degree in Human Resource Management from Keller Graduate School and a Bachelor of Science in Business Administration from Kansas State University, Jeanette is well-equipped to lead and support clients in navigating complex HR challenges.
Throughout her 15-year tenure as Director of Human Resources, she has been instrumental in positioning Axcet as the Midwest’s largest and premier Professional Employer Organization (PEO). Her previous roles at Axcet include Director of Employee Benefits and Senior HR Consultant, where she gained extensive experience in HR outsourcing, payroll administration, and employee risk management.
Jeanette’s leadership reflects her deep commitment to helping businesses thrive through strategic, compliance-driven HR solutions. Through her writing, she shares insights on HR strategy, compliance, and best practices to help employers confidently manage their workforce.
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