IRS Releases 2025 ACA Affordability Percentage
The IRS has released the 2025 ACA affordability percentage. After a significant drop in that percentage for 2024 to 8.39%, the new affordability percentage for 2025 is 9.02%.
Applicable Large Employers (ALEs) are subject to the affordability rules of the ACA. ALEs are defined as those employers who have 50 or more full-time equivalents during the appropriate Measurement Period. ALEs who utilize one of the affordability safe harbors may be able to increase the amount of required employee contributions without throwing the group health plan into the unaffordable category, and thus have the ACA’s large employer mandate penalties kick in.
Under the ACA, employers have their choice of three safe harbors to which to apply the affordability percentage:
- The employee’s form W-2, Box 1 amount from the prior year;
- The employee’s rate of pay; or
- The federal poverty guidelines (FPG) level for a single individual. This amount utilizes the prior year’s level (2024 in this case).
The employer’s choice of safe harbor method must be applied uniformly to all eligible employees.
Thus, for an employer that utilizes the third safe harbor (the federal poverty guideline for a single individual), the 2025 amount of an employee’s monthly contribution towards single health coverage—and it’s always applied to single health coverage regardless of an employee’s actual election to add coverage for dependents—would be the 2024 FPG amount ($15,060) times 9.02% divided by 12, or $113.20 per month.
