​​​​​IRS Issues Affordability Percentage Adjustment for 2025

As shown in the table below, for plan years beginning in 2025, the affordability percentage for employer mandate purposes is indexed to 9.02%. This is a slight increase from 2024. Employer shared responsibility payments are also indexed and decreased for the first time in 2025.

Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year. Coverage is considered affordable if the employee’s required contribution for self-only coverage under the employer’s lowest-cost, minimum value plan does not exceed 9.02% of the employee’s household income in 2025 (prior years are also shown above). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level.

​If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for Marketplace coverage, the employer may be subject to an employer shared responsibility payment.

Since 2019, the individual mandate penalty imposed on individual taxpayers for failure to have qualifying health coverage was reduced to $0 under the Tax Cuts and Jobs Act, effectively repealing the federal individual mandate. A previous lawsuit challenging the constitutionality of the ACA due to this change to the individual mandate penalty was unsuccessful.  The employer mandate has not been repealed and the IRS continues to enforce it through Letter 226J. The IRS is currently enforcing employer shared responsibility payments for tax years 2022 as well as enforcing the reporting requirement itself. The IRS aggressively enforces the ACA reporting requirement, notifying applicable large employers via Letter 5699 if the IRS has not received the employer’s form 1094-C and forms 1095-C.