IRS Raises ACA Affordability Threshold to 9.02% for 2025

The IRS has announced an increase in the safe harbor affordability threshold to 9.02% for the 2025 tax year, allowing employers more flexibility in employee health insurance premiums under the Affordable Care Act (ACA). This marks a shift from the previous years, from 9.83% in 2021 to an all-time low of 8.39% for 2024. Employers must prepare to comply with this new percentage, ensuring that at least 95% of full-time employees receive affordable Minimum Essential Coverage (MEC).

Significantly, the updated threshold entails that premiums must not exceed $15,060 annually or $1,255 monthly for the year 2025. Employers face penalties if they fail to meet the ACA's affordability requirements, especially if employees qualify for premium tax credits (PTC) through health insurance marketplaces. The article outlines various safe harbors available to employers in determining if their coverage is affordable, including the Federal Poverty Level (FPL) safe harbor, which requires a premium rate of $113.20 or less for employee-only coverage.

Employers are urged to stay informed about ACA compliance to avoid potential penalties and should consider using services like Trusaic's ACA Complete® to ensure adherence to the new regulations. This proactive approach will help employers navigate the complexities of the ACA and maintain compliance status with IRS requirements.