In January of 2024, the federal poverty level (FPL) for the year was announced to be $15,060, which is an increase from the previous year’s $14,580. This update has significant implications for employers offering non-calendar year plans, specifically for Affordable Care Act (ACA) affordability calculations.
ACA Affordability Assessment
Under the ACA, applicable large employers (ALEs) with 50 or more full-time employees are required to provide affordable health coverage to their full-time employees or potentially face penalties. For the 2024 plan year, affordability is defined as the cost of coverage being less than 8.39% of an employee’s household income. Employers can rely on one of three safe harbors to determine affordability: Federal Poverty Level (FPL), W-2, and Rate of Pay.
The FPL Safe Harbor
The FPL safe harbor deems coverage affordable if the cost to employees for self-only coverage on the most economical plan offered is less than 8.39% of the FPL. For the 2024 non-calendar-year plans, the FPL figure is set at $105.29, calculated by taking 8.39% of the 2024 FPL ($15,060), dividing it by 12, and rounding it to the nearest penny. This is a decrease from the previous year, which was $110.81 in 2023. Employers with non-calendar year plans can use the FPL amount from six months before the start of the plan year, which provides more flexibility when determining affordability.
Considerations for Non-Calendar Year Plans
Employers who have non-calendar year plans need to pay close attention to the start date of their plan year when assessing affordability under the Federal Poverty Level (FPL) safe harbor. Employers may also need to adjust their contribution strategies to ensure compliance with the Affordable Care Act’s (ACA) affordability requirements.
These updates highlight the importance of staying informed about regulatory changes that could affect healthcare plans and contributions, for both employers and individuals. As the healthcare system continues to evolve, it becomes increasingly important to be proactive and adaptable to these changes to navigate the system effectively.
Partnering with Pierce Group Benefits
It is critical for employers to stay up to date with the adjustments related to the Affordable Care Act (ACA) compliance. If you have questions about navigating the 2024 affordability safe harbor adjustments, please reach out to your Pierce Group Benefits Account Executive or contact a PGB Representative at firstname.lastname@example.org.