IRS Updates Health Coverage Affordability Calculation for 2024

The Internal Revenue Service (IRS) has issued Revenue Procedure 2023-29 providing the indexing adjustment for the required contribution percentage. For plan years beginning in 2024, the required contribution percentage is 8.39%, down from 9.12% in 2023.

The affordability calculation can determine whether an individual can afford employer-sponsored health coverage and affect whether the individual would be eligible for a premium tax credit on the health insurance exchanges. This could affect employers that do not use a safe harbor method to determine whether the coverage they offer is affordable to employees.

For plan years beginning in 2024, employer-provided coverage is considered affordable for an employee if the employee required contribution is no more than 8.39% of that employee’s household income. Because applicable large employers generally do not know their employees’ household incomes, there are three safe harbor methods for calculating affordability.