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The IRS announced that the affordability percentage for the 2025 calendar year will increase to 9.02% (up from 8.39% which is the rate for the 2024 calendar year).
Under the Affordable Care Act’s employer mandate, an applicable large employer is required to offer at least one health plan that provides affordable, minimum value coverage to its full-time employees (and minimum essential coverage to their dependents) or pay a penalty. For this purpose, “affordable” means the premium for self-only coverage cannot be greater than a specified percentage of the employee’s household income. Based on this recent guidance, that percentage will be 9.02% for the 2025 calendar year.
Employers with non-calendar year plans will still have to use the affordability percentage for 2024 until the start of their 2025 plan year.
Employers need to remember the old “family glitch” was removed starting in 2023. This rule previously prohibited family members of the employee from being eligible for subsidies when the employee was offered affordable, minimum value medical coverage. The removal of the family glitch did not carry new penalty exposure for employers, but it did open the door to subsidy eligibility for family members when the employee’s offer of family coverage is not affordable based on household income. The increase in the affordability percentage for 2025 may lead to some family members who were eligible for subsidies in 2024 no longer being eligible in 2025.