2025 Open Registration Edition
The 2025 employee benefits open enrollment season is approaching. Newly released IRS guidance requires employers to review the cost of group health insurance plans to ensure affordability. Businesses that rely on the ACA’s safe harbor calculations may be able to increase employee contributions to the lowest-cost private plan option in 2025.
ACA affordability standards
Employers with an average of 50 or more full-time equivalent employees during the previous calendar year (applicable large employers (ALEs)) must provide at least 95% of their full-time employees (average workday of 30 hours) with affordable A minimum level of security must be provided. weekly) and their dependents. Employers can choose from three safe havens to determine whether a benefit is considered affordable:
W-2 wages: Under this method, employee contributions are considered affordable if they do not exceed 9.02% of the employee’s Form W-2 wages in Box 1. Salary Rate: Under this method, hourly employee contributions are treated as follows: It is affordable if it does not exceed 9.02% of the worker’s hourly wage x 130 hours. For a minimum wage hourly worker based in Portland (currently making $15.95 an hour), the maximum contribution you can pay is $187.03 per month. For salaried employees, employee contributions are considered affordable if they do not exceed 9.02% of monthly salary. The salary exemption threshold will increase to $58,656 starting January 1, 2025, meaning salaried employees should not expect to pay more than $440.90 per month. Federal Poverty Line: Using this method, employers will not charge employees more than 9.02% of their declared FPL. FPL is currently $15,060 = $113.20 per month in the continental US.
Based on the three different safe harbor methods (as explained above), employers in the Pacific Northwest with a minimum wage rate higher than the federal minimum wage of $7.25 per hour can use the wage rate safe harbor method. , you can receive more contributions.
Employer joint liability payments
Employers who fail to provide affordable coverage are subject to two types of ESRP penalties:
“Part A Penalties”—Failure of ALE to provide minimum required coverage to substantially all full-time employees, resulting in one full-time employee purchasing separate insurance from an exchange and receiving premium subsidies. If the employer receives the money, it will be subject to a penalty of $241.67 per full-time employee. Monthly full-time employees (other than the first 30 employees) for whom minimum coverage could not be provided. As an example, if an employer with 50 full-time employees fails to provide minimum required coverage to at least 48 employees (95% of 50), one full-time employee will If you purchase insurance on an exchange, you could be subject to a $58,000 annual penalty. I received an insurance premium subsidy.
“Part B Penalty”—ALE fails to provide affordable minimum mandatory coverage to substantially all of its full-time employees and one of its full-time employees purchases separate insurance from an exchange. If the employer receives a premium subsidy, the employer will be subject to a monthly penalty of $362.50. For each individual who received premium assistance.
open registration season
As insurance plan renewal rates begin to be determined for Open Enrollment in 2025, employers will be considering how much they will charge per employee to offer the lowest-cost plan. Employers who charge more than the safe harbor amount risk being fined next year.
For employers in Oregon and Washington, where the minimum wage rate is more than double the federal amount, the salary rate safe harbor method can help maximize employee contributions.
