The U.S. Department of Health and Human Services (HHS) updates federal poverty levels (FPLs) each year to determine eligibility for certain programs and benefits. HHS’ new guidelines set the 2024 FPL for an individual at $15,060 (up from $14,580 for 2023) in the 48 contiguous
states and the District of Columbia. For Alaska and Hawaii, FPLs for an individual are $18,810 and $17,310, respectively (up from $18,210 and $16,770 for 2023).
FPLs may impact an applicable large employer’s (ALE) potential liability under the Affordable Care Act’s (ACA) pay-or-play rules in two ways:
- ALEs may use the FPL safe harbor to determine the affordability of their health plan coverage; or
- FPLs are used to determine eligibility for premium tax credits for health insurance purchased through an ACA Marketplace.
An ALE is only liable for a pay-or-play penalty if one or more of its full-time employees receives a premium tax credit for health insurance purchased through a Marketplace. Individuals cannot receive these if they are eligible for affordable, minimum-value health coverage through their employer, regardless of whether their income meets FPL guidelines.
Highlights
- ALEs may be subject to pay-or-play penalties if they do not offer affordable, minimum-value health coverage to their full-time employees.
- These penalties are only triggered when a full-time employee receives a premium tax credit for Marketplace coverage.
- FPLs impact the ACA’s pay-or-play rules because they can determine the affordability of an ALE’s health coverage and whether an individual is eligible for a premium tax credit.
Important Dates
Jan. 11, 2024
FPL guidelines for 2024 became effective.
Jan. 12, 2023
FPL guidelines for 2023 became effective.
Action Steps
To avoid pay-or-play penalties, ALEs should confirm their health coverage will be affordable before the start of each plan year. ALEs that use the FPL safe harbor to determine affordability should apply FPL guidelines in effect within six months before the first day of the plan year. ALEs with calendar year health plans should use the 2023 FPL guidelines for the 2024 plan year, while ALEs with non-calendar-year health plans may use the new 2024 FPL guidelines.
DOWNLOAD: 2024 Federal Poverty Levels Impact Employer Liability Under Pay-or-Play Rules
This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2024 Zywave, Inc. All rights reserved.
