2024 federal poverty levels can impact ESR affordability 

Updated guidelines set the 2024 federal poverty level (FPL) at $15,060 (up from $14,580 in 2023) for a person living in the mainland US, but $17,310 in Hawaii and $18,810 in Alaska. Under the Affordable Care Act (ACA), the FPL can affect employer shared-responsibility (ESR) play-or-pay assessments in two ways:

• Premium tax credits. Individuals with household incomes between 100% and 400% of the FPL are potentially eligible to receive premium tax credits for health coverage purchased through a public exchange. ACA full-time employees' receipt of subsidized exchange coverage can trigger play-or-pay assessments. (Note that premium tax credit eligibility expanded to individuals earning more than 400% of the FPL for 2023 through 2025 under the Inflation Reduction Act (Pub. L. No. 117-169).)
• Affordability testing. Employers can use the FPL under one play-or-pay affordability safe harbor to test whether their lowest-cost, self-only minimum essential coverage (MEC) with minimum value is affordable to employees. When conducting this test, an employer may use the FPL,  in effect within six months before the start of the plan year.

2024 play-or-pay FPL affordability safe harbors. The Department of Health and Human Services (HHS) issued updated FPL figures effective Jan. 11, 2024, that will apply for 2025 calendar-year plans and noncalendar-year plans beginning in 2024. Employers with calendar-year plans can’t rely on those higher FPLs for 2024 affordability testing. Instead, 2024 calendar-year plan sponsors must use the 2023 FPL amounts. As a result, the 2024 FPL affordability safe-harbor monthly employee contribution limits for the lowest-cost, self-only MEC with minimum value are as follows:

• Noncalendar-year plans beginning in 2024: $105.29, calculated as (8.39% x $15,060 FPL for 2024) ÷ 12, rounded to the nearest penny (see discussion below for a special rule). This will mark the first time that the FPL safe-harbor dollar amount has decreased for noncalendar-year plans (down from $110.81 in 2023). As a result, employers that use the exact safe harbor dollar amount will have a smaller employee contribution for the lowest-cost, self-only option for the noncalendar-plan year that beings in 2024 than for the one that began in 2023.
• 2024 calendar-year plans: $101.94, calculated as (8.39% x $14,580 FPL for 2023) ÷ 12, rounded to the nearest penny. This will mark the second time in three years that the FPL safe-harbor dollar amount has decreased for calendar-year plans (down from $103.28 in 2023).

Special rule for noncalendar-year plans. Noncalendar-year plans may use the FPL in effect within six months before the first day of the plan year. For the 2024 plan year, noncalendar-year plans benefit from using the higher 2024 FPL amounts.

The adjusted affordability percentage applies on a plan-year — not calendar-year — basis. This means noncalendar-year plans beginning in 2023 will continue to use 9.12% to determine affordability in 2024 until their new plan year starts. As a reminder, for 2023 noncalendar-year plans using the mainland US FPL affordability safe harbor, the required employee contribution cannot exceed $110.81 per month, calculated as (9.12% x $14,580 FPL in 2023) ÷ 12, rounded to the nearest penny.

• HHS poverty guidelines for 2024 (HHS, Jan. 11, 2024)
• HHS poverty guidelines for 2023 (Federal Register, Jan. 19, 2023)
• Public L. No. 117-169, the Inflation Reduction Act of 2022 (Congress, Aug. 16, 2022)
• Employer shared-responsibility provisions (IRS, regularly updated)
• Q&As on employer shared-responsibility provisions under the Affordable Care Act — Affordability (see Q&A-40) (IRS, regularly updated)

• 2024 quick benefit facts (Jan. 15, 2024)
• 2024 affordability percentage for employer health coverage drops (Aug. 23, 2023)
• Employers face ongoing liability for ACA play-or-pay assessments (March 2, 2020)