IRS Lowers Affordability Threshold to 9.12%

The Internal Revenue Service (IRS) lowered the affordability threshold this week, as outlined in Revenue Procedure 2022-34. This limit is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage per IRS Code § 36B(c)(2)(C)(i)(II).

Under the ACA’s employer shared responsibility provisions, certain employers (applicable large employers or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS.

The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions.” The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions. – IRS

The affordability percentage has dropped to 9.12%, the lowest-ever since 2015. A calendar plan year will therefore use the 9.12% threshold for a plan year beginning January 1, 2023. Note that affordability safe harbors are indexed for inflation similarly to how affordability is determined.