- About PS&F
- Industry Focus
- Client Tools
- Education & Events
August 5, 2022
In Revenue Procedure 2022-34, the IRS significantly decreased the affordability percentage from 9.61% to 9.12% for 2023. This percentage determines which applicable large employers may face penalties under §4980H(b) for failure to offer affordable coverage as well as which individuals may qualify for subsidized coverage through a public Exchange.
Revenue Procedure 2022-34 – https://www.irs.gov/pub/irs-drop/rp-22-34.pdf
Under §4980H, applicable large employers (50 or more full-time equivalents (FTEs)) must offer coverage to full-time employees that is affordable to avoid potential §4980H(b) penalties. In addition, individuals enrolling for coverage through a public Exchange will not qualify for subsidized coverage if they are eligible for employer-sponsored group health plan coverage that is affordable.
Coverage is generally considered “affordable” if the employee contribution for employee-only (single) coverage does not exceed a set percentage (9.12% in 2023) of household income. Note – Unless final rules are released later this year indicating otherwise, coverage is considered affordable for dependents as well, regardless of the contribution amount, so long as the employee-only (single) coverage is affordable.
Coverage is considered “affordable” under §4980H(b) requirements if the employee contribution satisfies at least one of the three available safe harbors (i.e., federal poverty level (FPL), rate of pay, or Form W-2).
Originally, for 2014, the required contribution percentage for determining affordability was set at 9.5%. The percentage is adjusted annually. See applicable percentages for each year in the table below.
Effective for plan years beginning on or after January 1, 2023, the percentage to be used in affordability calculations is 9.12%. For calendar year plans, 9.12% applies beginning in January 2023, but for a non-calendar year plan that renews in September, 9.12% applies beginning in September 2023.
The decrease in the affordability percentage (from 9.61% in 2022 to 9.12% in 2023) may require employers to lower employee contributions for the 2023 plan year to meet the affordability requirements under §4980H(b).
For more details about affordability requirements and use of an affordability safe harbor, see our issue brief on affordability considerations found at
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.