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Important change made to affordability calculations for 2024

Updated: May 30




Understanding Federal Poverty Levels (FPL) for Employer Affordability Calculations in 2024


In a recent update, the 2024 federal poverty level has been released, impacting how employers may approach setting up their affordability calculations. Employers, especially those classified as applicable large employers, need to ensure they offer minimum value affordable coverage to eligible employees. Here's a breakdown of what you need to know regarding the federal poverty level and its implications for your calculations.


Federal Poverty Level for 2024


  • For the year 2024, the federal poverty level stands at $15,600 for an individual.

  • This figure serves as a crucial component when determining the maximum amount an employee can be charged for the lowest cost plan while still complying with the federal poverty level Safe Harbor regulations.


Affordability Calculations (for employers using the FPL safe harbor)


  • To calculate the employee's contribution cap, multiply the federal poverty level ($15,600) by the affordability percentage applicable to your 2024 plan year, which is 8.39%.

  • This computation results in $15.29, indicating the highest amount an employee can be required to pay for self-only coverage under the federal poverty level Safe Harbor provision.


Compliance Considerations


  • For non-calendar year plans starting after January 1st in 2024, the most recent federal poverty level should be utilized.

  • This approach ensures that your affordability calculations accurately reflect the current federal poverty standards and maintain compliance with regulatory requirements.


Alternative Safe Harbors


  • If the employee contribution exceeds the $15.29 threshold set by the federal poverty level Safe Harbor, employers must explore alternative safe harbors such as the rate of pay or W2 methodologies to determine affordability.

  • Adhering to the appropriate safe harbor is essential to avoid penalties and ensure compliance with Affordable Care Act regulations.



Conclusion


One of the most common issues BCS sees with employers is mis-calculation of what constitutes "affordable" coverage. Staying informed about the federal poverty level updates and their impact on affordability calculations is crucial for employers seeking to comply with ACA requirements.


By understanding how to leverage the federal poverty level Safe Harbor and alternative safe harbors, employers can accurately determine employee contributions while ensuring compliance with Affordable Care Act provisions. If you have any questions or require further clarification on federal poverty level implications for employer affordability calculations in 2024, feel free to reach out. Thank you for watching.


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