
Issue Date: August 2022
In Revenue Procedure 2022-34, the IRS significantly decreased the affordability percentage from 9.61% to 9.12%
for 2023. This percentage determines which applicable large employers may face penalties under §4980H(b) for
failure to offer affordable coverage as well as which individuals may qualify for subsidized coverage through a
public Exchange.
Revenue Procedure 2022-34 – https://www.irs.gov/pub/irs-drop/rp-22-34.pdf
BACKGROUND
Under §4980H, applicable large employers (50 or more full-time equivalents (FTEs)) must offer coverage to full-time
employees that is affordable to avoid potential §4980H(b) penalties. In addition, individuals enrolling for
coverage through a public Exchange will not qualify for subsidized coverage if they are eligible for employer-sponsored
group health plan coverage that is affordable.
Coverage is generally considered “affordable” if the employee contribution for employee-only (single) coverage
does not exceed a set percentage (9.12% in 2023) of household income. Note – Unless final rules are released yet this
year indicating otherwise, coverage is considered affordable for dependents as well, regardless of the contribution amount,
so long as the employee-only (single) coverage is affordable.
Coverage is considered “affordable” under §4980H(b) requirements if the employee contribution satisfies at
least one of three available safe harbors (i.e., federal poverty level (FPL), rate of pay, or Form W-2).
REQUIRED CONTRIBUTION PERCENTAGE
Originally, for 2014, the required contribution percentage for determining affordability was set at 9.5%. The
percentage is adjusted annually. See applicable percentages for each year in the table below.
Affordability Percentage:
2015 2016 2017 2018 2019 2020 2021 2022 2023
9.56% 9.66% 9.69% 9.56% 9.86% 9.78% 9.83% 9.61% 9.12%
APPLICATION
Effective for plan years beginning on or after January 1, 2023, the percentage to be used in affordability
calculations is 9.12%. For calendar year plans, 9.12% applies beginning in January 2023, but for a non-calendar
year plan that renews in September, 9.12% applies beginning in September 2023.
The decrease in the affordability percentage (from 9.61% in 2022 to 9.12% in 2023) may require employers to lower employee contributions for the 2023 plan year to meet the affordability requirements under §4980H(b).
For more details about affordability requirements and use of an affordability safe harbor, see our issue brief
on affordability considerations found at https://www.benefitcomply.com/resources/2022/08/03/affordabilityconsiderations/.