2025 ACA Affordability Threshold
The IRS has released a Revenue Procedure, which significantly increases the affordability threshold for ACA (“Affordable Care Act”) Employer Mandate Purposes (“Pay or Play”) to 9.02% for plan years beginning in 2025.
For reference purposes:
- 2015 Percentage: 9.56%
- 2016 Percentage: 9.66%
- 2017 Percentage: 9.69%
- 2018 Percentage: 9.56%
- 2019 Percentage: 9.86%
- 2020 Percentage: 9.78%
- 2021 Percentage: 9.83%
- 2022 Percentage: 9.61%
- 2023 Percentage: 9.12%
- 2024 Percentage: 8.39%
- 2025 Percentage: 9.02%
The Pay or Play rules only apply to employers considered “Applicable Large Employers” or “ALEs”. In general, ALEs are employers that employ an average of at least 50 full time plus full time equivalent employees on business days during the preceding year. Under the ACA’s Pay or Play rules, ALEs must offer affordable and adequate coverage to all their full time employees and dependents or face a potential penalty. These affordability thresholds are used in making the affordability determination. Employers that use the exact safe harbor dollar amount to set employee contributions may increase the current employee contribution for the lowest cost, self only-option for the 2025 plan year.
