Late last week, the 2025 affordability percentage for large employers was released.
This number determines whether the employer’s coverage is “affordable” for an employee.
There are three safe-harbor ways an employer can determine whether coverage is affordable for a certain employee:
🔹Rate of Pay
🔹W-2
🔹Federal Poverty Level
Here’s an example:
ABC Company is offering a health plan that meets minimum value, and for 2025, they will be using the Rate of Pay safe harbor to set premium amounts for full-time staff.
Let’s say their lowest paid employees make $10 per hour. The employer would use 130 hours per month times $10 per hour, or $1,300 per month.
The employer would then set the employee’s monthly premium cost so it doesn’t exceed 9.02% of $1,300, or $117.26 per month.
In 2024, the percentage threshold was 8.39%, which meant the most an employee making $10/hr could be charged for the lowest-cost plan was $109.07.
To remain compliant, the employer in this scenario will need to adjust the company contribution to ensure that the coverage stays affordable.
#compliance #affordabilityindex #largegroup #healthinsurance #employeebenefits #groupbenefits #healthplans
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