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IRS Announces Indexing Adjustments for
2023 ACA Affordability Calculations

Client Alert Applies To: Self-Funded, Fully-Funded, Large Group, and Small Group

The IRS has announced 2023 indexing adjustments for important percentages under the Affordable Care Act (ACA). In particular, for 2023, the required contribution percentage is used to determine whether employer-sponsored health coverage is “affordable” for purposes of the employer shared responsibility (pay or play) penalty will be 9.12%. This is down from 9.61% in 2022 and is the most substantial decrease from the baseline affordability percentage (9.5%) since the ACA penalty rules were implemented.

The updated percentage is effective for plan years beginning on or after January 1, 2023. Employers will want to evaluate their required employee contributions for the 2023 plan year using this new percentage. Employers subject to the employer shared responsibility penalty (i.e., employers with 50 or more full-time or full-time equivalent employees) whose 2022 employee contribution amount was close to the maximum amount allowed, may need to lower the employee contribution amount for 2023 to meet affordability requirements.

© 2022 by Moreton & Company. This Client Alert is intended to alert recipients to recent legal developments. It does not constitute the rendering of legal advice or recommendations and is provided for your general information only. If you need legal advice upon which you can rely, you must seek an opinion from your attorney.