2024 ACA Affordability Threshold Decreased to 8.39%
The IRS just announced a significantly lower ACA affordability percentage for 2024 (8.39%) than for 2023 (9.12%). Applying the 2023 federal poverty guidelines, this means that the maximum monthly premium which will satisfy the ACA federal poverty level safe harbor in 2024 is $101.93 (down from $103.28 in 2023).
Depending on the circumstances, premiums that were affordable in 2023 might not be affordable in 2024.
Since employers don’t know their employees’ household incomes, the following three safe harbors were put in place by the ACA to be used in lieu of household income:
Form W-2 Wages Safe Harbor
The employee’s W-2 wages, as reported in Box 1, as of the first day of the plan year.
Example: Under the W-2 Wages Safe Harbor, in 2024, if an employee’s Box 1 wages are $30,000 then that employee’s required monthly contribution for the lowest individual coverage that meets minimum value can be no more than $209.75 ($30,000 X .0839 divided by 12) for the offer to be considered “affordable”. This calculation assumes the employee was employed with the company for the entire year and offered coverage for all 12 months.
Note: If an employee is not employed for the entire year or there is a waiting period, an adjustment is made to the W-2 wages to account for this as follows: W-2 wages X (calendar months offered coverage / months of employment).
Rate of Pay Safe Harbor
The employee’s hourly rate of pay x 130 hours, as of the first day of the plan year, regardless of how many hours the employee actually worked.
Example: Under the Rate of Pay Safe Harbor, in 2024, if an hourly employee earns $15 an hour then that employee’s required monthly contribution for the lowest individual coverage that meets minimum value can be no more than $163.61 ($15 X 130 X .0839) for the offer to be considered “affordable”.
Federal Poverty Level Safe Harbor
Since the individual Federal Poverty Level (FPL) isn’t officially published until January, employers can use the FPL in effect six months prior to the beginning of the plan year.
Example: Under the Federal Poverty Level Safe Harbor, for January 2024, the maximum monthly employee contribution for the lowest individual coverage offered that meets minimum value can be no more than $101.93 to be considered “affordable” ($14.580 (2024 FPL) X .0839 divided by 12).
Currently, meeting affordability applies only to applicable large employers (ALE’s) under the Employer Shared Responsibility Provisions of the ACA.
If you have any questions regarding this, please contact us.
Discover the Benefits of Electronic Payroll Onboarding with CHR
Welcome to the digital age of human resources and payroll management! At CHR, we’ve seen firsthand the benefits of electronic payroll onboarding for both employers and new employees. Here are the major benefits from electronic onboarding you can expect when you work with us for payroll administration:
Streamlined Processes: Efficiency at Its Best
One of the most significant advantages of electronic payroll onboarding is the streamlined process it offers. Gone are the days of manual data entry, endless paperwork, and the associated errors. With digital onboarding, we’ve witnessed a dramatic reduction in administrative burdens. This efficiency not only saves time but also minimizes the risk of errors, ensuring a smooth transition for new hires.
Enhanced Security: Safeguarding Sensitive Information
Electronic payroll onboarding provides an added layer of protection for sensitive employee information. With advanced encryption and secure data storage, both employers and employees can rest assured that personal details are safe from unauthorized access.
Eco-Friendly: Embracing a Greener Workplace
Transitioning to an electronic system significantly reduces paper usage, contributing to a more eco-friendly workplace. This not only aligns with our company’s sustainability goals but also resonates with environmentally conscious employees who value green initiatives.
Accessibility: Information at Your Fingertips
Employees can complete necessary forms and access important information from anywhere, at any time. This flexibility is particularly beneficial in today’s remote and mobile workforce. In addition, our PRISM platform allows employers to track an employee’s progress in adding their information to the system.
Employee Experience: Starting Off on the Right Foot
A smooth onboarding process sets the tone for a positive employee experience. Electronic payroll onboarding is user-friendly, guiding new hires through each step with ease. This approach can significantly enhance employee satisfaction from day one, laying the foundation for long-term engagement and retention.
Compliance: Keeping Up with Regulations
Staying compliant with evolving labor laws and tax regulations is a challenge for any organization. Labor and tax laws are complex, and even minor violations can result in hefty fines because the Department of Labor and the IRS do not take non-compliance with leniency. Electronic payroll systems are designed to stay updated with the latest legal and tax requirements, ensuring that both the employer and employee remain compliant.
Cost-Effective: A Smart Investment
While there is an initial investment in setting up an electronic payroll system, the long-term cost savings are substantial. Reduced paper costs, time savings, and decreased error rates all contribute to a healthier bottom line.
Payroll Services Made Easy
Electronic payroll onboarding is a win-win for both employers and new employees, offering efficiency, security, and a host of other benefits. CHR can assist you in setting up electronic payroll onboarding in our PRISM platform. Plus, you’ll always have a dedicated payroll rep on-call to assist you. Contact us today to get started.
