The Department of Health & Human Services (“HHS”) recently announced the 2023 Federal Poverty Level (“FPL”) guidelines which, among other things, establish the FPL affordability safe harbor for purposes of the Affordable Care Act (“ACA”) employer mandate. For plan years beginning February 1, 2023 or later, the 2023 FPL safe harbor is $110.80/month in the lower 48 states and DC, $138.39/month for Alaska, and $127.45/month for Hawaii. As a reminder, a plan can use poverty guidelines in effect within 6 months before the first day of the plan year for purposes of using an affordability safe harbor. Because the 2023 FPL guidelines were announced after the start of the calendar year, planswith plan years beginning on January 1, 2023 use $103.28/month for the lower 48 states and DC ($129.12/month for Alaska and $118.78/month for Hawaii), which is 9.12% of the applicable 2022 FPL. The increased threshold of $110.80/month for the lower 48 states and DC based on the 2023 FPL applies to plan years beginning on or after February 1, 2023.
Background and FPL Safe Harbor
Large employers may be subject to the employer mandate penalty under the ACA if they do not offer affordable, minimum value coverage to all full-time employees, and at least one full-time employee receives a subsidy in the Marketplace. A large employer’s offer of coverage will be considered “affordable” under the FPL safe harbor if the employee’s required monthly contribution for the lowest cost self-only coverage that provides minimum value does not exceed 9.5% (as indexed)of a monthly amount determined as the FPL for a single individual for the applicable calendar year, divided by 12.
2023 FPL Affordability Safe Harbor
For FPL affordability safe harbor purposes, the applicable FPL is the FPL for the state in which the employee is employed. The 2023 FPL is $14,580 for a single individual in every state (and Washington D.C.) except Alaska or Hawaii. Thus, if the employee’s required monthly contribution for the lowest cost self-only coverage that provides minimum value is $110.80 (9.12% of $14,580/12, rounded down) or less, the employer’s offer of coverage meets the FPL affordability safe harbor for a plan year beginning February 1, 2023 or later in the lower 48 states and DC.