On September 9, 2024, the IRS published Revenue Procedure 2024-35, which provides the employer contribution percentage requirements applicable for plan years beginning in calendar year 2025 and the 2025 premium tax credit (PTC) table.
The ACA’s employer-shared responsibility rules (also known as the employer mandate) require an employer to provide affordable, minimum-value coverage to its full-time employees. The IRS required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual affordable coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.
In 2025, the ACA's affordability percentage will increase significantly to 9.02% (up from 8.39% in 2024). For the employer mandate and affordability, this means that an employee’s required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.02% of the federal poverty line (FPL) or of an employee’s W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon). Under the 2025 affordability threshold, the maximum employee cost-share for the lowest-cost self-only coverage that will satisfy the FPL affordability safe harbor will be $113.20/month (for plan years that begin in 2025 prior to July 2025). Note that the monthly FPL amount is slightly higher for Alaska and Hawaii.
The 2025 PTC table used to determine an individual’s eligibility for PTCs is provided below. (These percentages are used to calculate the maximum amount an individual must pay for their health insurance premiums, with the remainder covered by the premium tax credit.) However, if the ALE offers affordable minimum value coverage to full-time employees, the employees will not be eligible for a premium tax credit.
|
Household Income % of Federal Poverty Line |
Initial Percentage |
Final Percentage |
|
Less than 150% |
0.00% |
0.00% |
|
At least 150% but less than 200% |
0.00% |
2.00% |
|
At least 200% but less than 250% |
2.00% |
4.00% |
|
At least 250% but less than 300% |
4.00% |
6.00% |
|
At least 300% but less than 400% |
6.00% |
8.50% |
|
At least 400% and higher |
8.50% |
8.50% |
Employers should be mindful of the upcoming 2025 affordability percentages and make sure that the premium offerings for 2025 remain affordable for full-time employees to avoid any employer-shared responsibility penalties.
For further information on the affordability requirements, please ask your broker or consultant for a copy of our NFP publications ACA: Employer Mandate Penalties and Affordability and Cost-Share Contribution Models: A Guide for Employers.
Revenue Procedure 2024-35