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The 2024 ACA ESRP Affordability Percentage

This week the IRS revealed an annual adjustment to the the Affordable Care Act’s (ACA) affordability percentage. This percentage helps determine whether employers may owe significant fines under the ACA’s Employer Shared Responsibility Provision (ESRP). The newly announced limit for group health plan years beginning in 2024 is 8.39%. This is significantly lower than 2023’s affordability percentage of 9.12%. The IRS announced this most recent annual change in Revenue Procedure 2023-29.

Employers and their benefits advisors should analyze how this lower affordability percentage impacts their ESRP Penalty risk next year. Incorporating the new limits into employee benefits planning for 2024 could spare employers from very large penalties down the road.

The Importance of the Affordability Percentage to Employers

The ACA’s ESRP applies to Applicable Large Employers (ALEs). ALEs are employers (or related employers) who employed 50 or more full time employees (or equivalents) during the prior year. ALEs who do not provide health coverage that is “affordable” to employees and their dependents risk significant tax penalties. For 2024, the penalty for failing to provide affordable coverage to each full time employee who receives a premium tax credit for health insurance coverage is $4,460 per year.

The ACA defines affordability as a percentage of each employee’s household income. Because employers typically cannot know an employee’s household’s other sources of income, the IRS allows employers to establish the affordability of their coverage in reference to three different benchmarks: the current Federal Poverty Level, the employee’s Rate of Pay, and the employee’s W2 income for the applicable year.

The percentage announced by the IRS this week is the maximum amount employers can charge for employee only group health insurance coverage as compared to any one of those three benchmarks.

How This Newly Announced Change Affects ALEs

Employers and their benefits advisors planning 2024 group health plan offerings need to understand the impact of the new percentage. Employee premiums that were affordable in 2023 may not be in 2024. Employers could avoid this penalty risk with proper preparation.

For example, assume an employee who earns an hourly wage of $20.00 per hour. Also assume that this employer chooses the Rate of Pay standard to establish that their coverage is affordable. In 2023, if the employer offered that employee coverage for $237 per month, it would have been considered affordable. In 2024, that same employee’s coverage would have been unaffordable even if the premium was reduced to $219 per month. This example becomes even more pertinent for employers with lower paid employees.

Analyzing and adjusting their 2024 employee premiums now could save employers enormous ESRP penalties in the years to come.

For More Help Understanding how the ESRP Applies to Your Situation

Employers can contact Admin America for more information about the ESRP. Contact our ACA team via telephone at (678) 578-4631 or via email at Alternatively, additional online resources are available here.

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So you forgot to file a Form 5500 for your large group health plan

Employers that offer group health plan benefits frequently overlook compliance with ERISA’s annual Form 5500 filing requirements. This creates enormous potential liability. Fortunately, the Delinquent Filer Voluntary Compliance Program (DFVCP) offers employers a simple and cost effective way to mitigate potential penalties. Without the DFVCP, those penalties might otherwise reach into the hundreds of thousands of dollars (or more). In this article, we’ll briefly describe the benefits of the DFVCP and the process for taking advantage of it. 

Form 5500 Reporting Requirements for Group Health Plans

The Employee Retirement Income Security Act (ERISA) requires most employers that offer non-retirement benefits (such as health and dental coverage, life insurance, disability payments, and other welfare-related benefits) covering 100 or more participants at the beginning of a plan year to file a Form 5500. Plans offered by organizations exempt from ERISA (such as governments and churches) are exempt from the Form 5500 filing requirements. 

Plan Administrators must file Form 5500s annually within seven months after the end of each applicable plan year. An extension of up to 2.5 months is possible by filing IRS Form 5558.  For example, ERISA requires employers who sponsor calendar year plans to file their Form 5500s by the end of following July (unless they have filed a Form 5558 extension request before that date).

The potential penalties for failing to timely file a required Form 5500 are staggering.  Both the Department of Labor (DOL) and the Internal Revenue Service (IRS) can separately assess penalties.  IRS penalties are limited to $25 per day, up to a maximum of $15,000. The DOL penalties are authorized up to $1,100 per day with no maximum.  At worst, those kinds of penalties jeopardize the entire business. At best, they jeopardize the loss of a lot of sleep.

The Delinquent Filer Voluntary Compliance Program (DFVCP)

The DFVCP is a formal program offered jointly through the DOL and the IRS. The program serves two purposes. It encourages employers to voluntarily correct annual filing violations and omissions. It also substantially reduces their potential penalty liability.  The DFVCP limits late filing penalties to $10 per day with caps of $2,000 per Plan Year or $4,000 per Plan, whichever is less.  Employers can accurately estimate their expected DFVCP payments in advance. The Employee Benefits Security Administration (EBSA) provides an online calculator.

Employers should plan to submit all delinquent Forms 5500 concurrently with the required DFVCP penalty payment. This maximizes their penalty risk reductions by maximizing the number of Plan Years to which the DFVCP applies.  Employers have the option of mailing in their penalty payment along with paper copies of their Form 5500s. Alternatively, they can pay the penalties online and electronically file through the EBSA’s EFAST2 system.

Get Form 5500 and DFVCP Help from Admin America

Admin America is happy to assist employers with the preparation of any necessary Form 5500s.  Our services include:

  • preparation of signature-ready, machine-readable Form 5500s with schedules, guaranteed for electronic within five business days;
  • Substantial fee discounts for Form 5500s prepared as the same time for multiple plan years for a single plan (or employer);
  • Access to the expertise of our on-staff attorney; and
  • Assistance with filing Form 5584 – Request for Extension for Time to File, if applicable.

Employers can get more information about Admin America’s services online, via e-mail at or by calling (678) 578-4644. You can also request a call from us.

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IRS Announces 2023 Limits For Health Savings Accounts

Each spring, the Internal Revenue Service announces inflation adjusted limits applicable to Health Savings Accounts (HSAs) for the following calendar year. The limits applicable for 2023 were recently released in Revenue Procedure 2022-24.

Releasing next year’s limits during the first half of the preceding calendar year allows employers to begin designing their group benefit plan offerings during the summer in time to prepare for open enrollment season later this fall. This early release is actually required by federal statute for those reasons.

The limits are all indexed to inflation. Everyone who buys groceries or gasoline is well aware that the rate of inflation for the past year has been historically high. Therefore it will come as little surprise that the 2023 thresholds are all increased above the 2022 limits. In fact, the amount of 2023’s annual increases are the largest in the history of Health Savings Accounts.

For 2023, the maximum allowable annual HSA contribution for individuals with single High Deductible Health Plan (HDHP) coverage will increase to $3,850 (from $3,650 in 2022). The maximum contribution for individuals with family HDHP coverage will increase to $7,750 (from $7,300 in 2022).  HSA eligible individuals over the age of 55 by the end of 2023 can contribute an additional $1,000 per year to their accounts.

For qualifying HDHPs in 2023, the minimum required deductible will increase to $1,500 for single coverage (from $1,400 in 2022). The minimum required deductible for family coverage will increase to $3,000 (from $2,800 in 2022).   The out-of-pocket maximum for HDHPs providing single coverage will increase to $7,500 (from $7,050 in 2022). For family coverage the out-of-pocket maximum will increase to $15,000 (from $14,100 in 2022).

For any compliance or strategy questions about offering Health Savings Accounts as part of your employee benefits package, send us a question here.