2023 IRS Play or Pay Affordability Percentage Released
The IRS has issued Revenue Procedure (Rev. Proc.) 2022-34, announcing that the affordability percentage for the 2023 plan year has decreased to 9.12% from 9.61 % in 2022.
The affordability percentage is officially referred to as the Section 36B Required Contribution Percentage under Internal Revenue Code (Code) section 36B and is used by employers subject to the Affordable Care Act’s (ACA’s) employer mandate, commonly known as “play or pay,” to assess the affordability of the health plans offered to their full-time employees. Employers subject to the employer mandate are referred to as applicable large employers (ALE). Failure by an ALE to offer at least one “affordable” health plan option could result in a penalty assessment under Code section 4980H(b) for each full-time employee who obtains coverage in the Marketplace and qualifies for a subsidy in lieu of enrolling for coverage under the ALE’s health plan.
In addition, the IRS updated Code section 36B’s Applicable Percentage Table for the 2023 calendar year. The table is used to determine an individual’s eligibility for that subsidy.
IMPACT OF DECREASED AFFORDABILITY PERCENTAGE
This is the most substantial decrease in this percentage since these rules were implemented. It is the lowest that this percentage has ever been set- at 0.38% below the statutory affordability percentage of 9.5%. As a result, many employers may have to lower their employee contributions to meet the adjusted percentage. Note also, that the affordability percentage for the individual mandate exemption increased slightly from 2022.
ADDITIONAL INFORMATION
For additional information, see our detailed Compliance Bulletin here. For questions regarding this Legislative Update or any other related compliance issues, please contact your Burnham Benefits Consultant or Burnham Benefits at 949‐833‐2983 or inquiries@burnhambenefits.com.
This Legislative Update was prepared by the Baldwin Regulatory Compliance Collaborative (the “BRCC”), a partnership of compliance professionals offering client support and compliance solutions for the benefit of the Baldwin Risk Partners organization, which includes: Jason Sheffield, BRP National Director of Compliance; Richard Asensio, Burnham Benefits Insurance Services; Nicole L. Fender, the Capital Group; Bill Freeman, AHT Insurance; Stephanie Hall, RBA/TBA; Caitlin Hillenbrand, AHT Insurance; Paul Van Brunt, Baldwin Krystyn Sherman Partners (BKS); and Natashia Wright, Insgroup.
Burnham Benefits and the BRCC do not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with applicable federal and state law requirements, and is based on our interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.