Changes in Affordability Thresholds and What It Means for ALEs
The Affordable Care Act (ACA) has long been a cornerstone of health insurance regulation for employers in the United States. For Applicable Large Employers (ALEs)—those with 50 or more full-time equivalent employees—compliance with ACA rules is essential to avoid costly penalties and ensure employee access to affordable, quality health coverage. One of the most critical and evolving aspects of ACA compliance is the affordability threshold—the measure that determines whether an employer’s offered health coverage is considered affordable under the law.
As affordability thresholds change, ALEs face new challenges and opportunities in how they track employee eligibility, calculate affordability, and report to the IRS. In this blog post, we’ll explore what the changing affordability thresholds mean for ALEs and how trusted ACA compliance solutions like ACA-Track can make this complex process manageable.
What Are Affordability Thresholds?
Under the ACA’s employer shared responsibility provisions (Section 4980H), ALEs must offer health insurance coverage that is:
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Affordable, and
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Provides minimum value to full-time employees (and their dependents).
The affordability threshold specifically relates to the employee’s share of the premium for self-only health coverage. The IRS sets this threshold annually, expressed as a percentage of the employee’s household income or a proxy measure thereof (such as the employee’s W-2 wages, rate of pay, or monthly salary). If an employee’s required contribution for coverage exceeds this threshold, the coverage is considered unaffordable, potentially triggering employer penalties if the employee obtains subsidized coverage through a Marketplace.
Recent Changes in Affordability Thresholds
Historically, the affordability threshold has increased modestly each year. For example:
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In 2023, the affordability threshold was approximately 9.12% of household income.
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For 2024 and beyond, the IRS adjusts this percentage to reflect inflation and changes in health care costs.
These annual changes impact ALEs significantly because the affordability threshold directly influences:
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Which employees are deemed to have access to affordable coverage,
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Whether the employer must make an Employer Shared Responsibility Payment (penalty),
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How employers calculate and monitor affordability for reporting purposes.
What It Means for ALEs
1. Increased Scrutiny on Accurate Hour Tracking
Affordability thresholds affect the definition of which employees qualify as full-time (generally those working an average of 30+ hours weekly). Employers must carefully monitor actual hours worked—including for variable-hour and part-time employees—to determine who is eligible for coverage and when affordability rules apply.
Failing to track hours accurately can lead to incorrect affordability calculations and increase risk of IRS penalties. Tools like ACA-Track help employers:
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Collect employee hours from multiple sources (payroll, timekeeping, manual entry),
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Monitor eligibility thresholds,
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Provide timely alerts for employees approaching full-time status.
2. Adjustments to ACA Reporting and Compliance Processes
Changes in affordability percentages require ALEs to update their internal policies and ACA reporting practices. This includes recalculating affordability metrics based on the latest IRS guidance and ensuring that forms 1094-C and 1095-C accurately reflect these changes when submitted to the IRS.
ACA-Track offers:
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Seamless integration with payroll and HRIS systems,
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Automated generation of IRS-compliant XML files for electronic filing,
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Error-checking and correction tools to minimize reporting mistakes,
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Dedicated client support to help interpret new affordability rules.
3. Potential Impact on Employer Penalties
If coverage is no longer considered affordable due to threshold changes, ALEs may be subject to increased employer shared responsibility penalties. These penalties can be substantial—$2,000 per full-time employee (excluding the first 30 employees) or $3,000 per employee receiving a Marketplace premium tax credit due to unaffordable coverage.
By staying current on affordability thresholds and using robust compliance software like ACA-Track, employers reduce their risk of penalties through timely adjustments to benefits offerings and accurate reporting.
How ACA-Track Simplifies ACA Compliance for ALEs
The evolving regulatory environment means ALEs need more than spreadsheets and manual processes to stay compliant. ACA-Track is a comprehensive ACA compliance service designed specifically to help employers:
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Collect all employee hours worked, including variable, part-time, and full-time employees, from multiple data sources.
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Monitor employee eligibility thresholds, waiver codes, leave events, and affordability percentages with customizable alerts.
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Report with confidence via accurate 1094-C and 1095-C filings submitted electronically to the IRS, along with employee forms.
Key Features Benefiting ALEs:
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Customizable Dashboards: Organize and filter ACA data by employee status, location, or compliance risk.
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Snapshot Summaries: Capture historical ACA data snapshots to track eligibility and affordability over time.
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Flexible Configuration: Adjust measurement, stability, and affordability periods to reflect changing IRS rules.
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Data Security: SOC 2 Type 2 compliant cloud storage with encrypted personal information.
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Dedicated Client Success Advisors: Personalized support to help employers navigate complex ACA rules.
With ACA-Track’s integration capabilities, ALEs can automate many compliance tasks, reduce administrative burden, and confidently meet ACA deadlines.
Conclusion
The continual changes in ACA affordability thresholds present significant challenges for ALEs, especially in terms of compliance risk, employee tracking, and accurate reporting. Employers must remain vigilant in updating their internal processes to accommodate these regulatory changes.
For ALEs seeking a trusted partner to manage ACA compliance, ACA-Track provides an all-in-one solution that simplifies data collection, eligibility monitoring, and IRS reporting—helping employers stay ahead of affordability changes and avoid costly penalties.
For more information on ACA compliance services and how ACA-Track can help your organization, visit ACA-Track. Stay compliant, minimize risk, and make ACA easier for your business.
