IRS Updates 2023 Required Contribution Percentage for Affordable Coverage

On August 1, 2022, the IRS published Revenue Procedure 2022-34, which provides the 2023 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2022.

The ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS' required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.

In 2023, the ACA's affordability percentage will decrease to 9.12% (down from 9.61% in 2022). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.12% of the federal poverty line or of an employee's W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).

The 2023 PTC table used to determine an individual's eligibility for PTCs is provided below:

The revenue procedure is effective for plan years beginning on and after December 31, 2022.

Employers should be mindful of the upcoming 2023 affordability percentages and make sure that the premium offerings for 2023 remain affordable for full-time employees to avoid any employer-shared responsibility penalties.

Revenue Procedure 2022-34 »