ACA Affordability 2024: Is Your Business’ Health Insurance Affordable?

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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What Is the 2024 ACA Affordability Percentage?

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:

W-2 Safe Harbor

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.

Rate of Pay Safe Harbor

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:

• The employee's lowest hourly rate of pay multiplied by 130 hours OR
• The employee's monthly salary (as long as it wasn't reduced during the year)

Federal Poverty Line Safe Harbor

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: 

• For calendar year plans, the prior year’s poverty line may be used, and 
• For non-calendar year plans, the current poverty line is used

Penalties for Non-Compliance with ACA Affordability Guidelines

ALEs 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:

4980H(a) Penalty

• Employers subject to penalty

  Employers who fail to provide minimum essential coverage to at least 95% of their full-time employees and their dependent children AND at least one full-time employee received a premium tax credit or cost-sharing subsidy in the federal or state Marketplace. 

• Monthly penalty for not offering coverage

  $2,970 divided by 12, times the number of full-time employees (minus up to 30).

4980H(b) Penalty

• Employers subject to penalty

  Employers who provide coverage to at least 95% of their full-time employees and their dependent children BUT the coverage does not pay at least 60% of the covered health care expenses for a standard population (minimum value) AND at least one full-time employee received a premium tax credit to help pay for coverage on Marketplace.

• Monthly penalty for not offering coverage that is affordable and provides minimum value

  $4,460 divided by 12, times the number of employees receiving a premium tax credit that month (up to a maximum of $2,970 divided by 12, times the number of full-time employees (minus up to 30).

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How to Remain Compliant with ACA Affordability in 2024

To stay compliant, ALEs should:

• Regularly Review and Adjust Premiums

  Make sure employee contributions do not exceed the ACA affordability threshold.

• Document Calculations

  Keep detailed records of how affordability was determined for each employee.

• Utilize Safe Harbor Methods

  Apply one of the three IRS safe harbor methods consistently for all employees.

• Stay Informed

  Keep up with any changes in ACA regulations and affordability percentages.

How a PEO, Like Axcet HR Solutions, Can Help

Navigating ACA compliance can be complex, but partnering with a PEO like Axcet HR Solutions offers significant advantages:

Expertise

Axcet’s HR professionals are well-versed in ACA regulations and can help ensure your business remains compliant.

Variety of Plans

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. 

Administrative Support

Axcet handles all plan administration including paperwork, renewals, plan selection and administrative tasks, allowing you to remain compliant while focusing on running your business.

Cost Savings

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.

Schedule a consultation with Axcet HR Solutions today to learn more about how we can help you provide big business benefits on a small business budget and support your ACA compliance efforts.