The Affordable Care Act (ACA) has been a hot topic since its implementation in 2010. Now in 2024, it’s important for businesses to understand how to calculate ACA affordability for their employees. In this article, we will provide a practical approach to mastering ACA affordability calculations for 2024.
Understanding ACA Affordability
Before we dive into the calculations, it’s important to understand what ACA affordability means. Under the ACA, employers with 50 or more full-time employees are required to offer affordable health insurance coverage to their employees. This means that the employee’s share of the premium for the lowest-cost self-only coverage must not exceed a certain percentage of their household income.
Calculating ACA Affordability
To calculate ACA affordability, you will need to know the employee’s household income and the cost of the lowest-cost self-only coverage offered by the employer. The affordability percentage for 2024 is set at 8.39%. This means that the employee’s share of the premium for the lowest-cost self-only coverage cannot exceed 8.39% of their household income.
Step 1: Determine the Employee’s Household Income
The first step in calculating ACA affordability is determining the employee’s household income. This includes all taxable income, such as wages, tips, and bonuses, as well as non-taxable income, such as child support and rental income. It’s important to note that household income is not the same as the employee’s salary or wages.
Step 2: Calculate the Affordability Threshold
The affordability threshold is the maximum amount that the employee’s share of the premium can be. To calculate this, multiply the employee’s household income by 8.39%. For example, if the employee’s household income is $50,000, the affordability threshold would be $4,195 ($50,000 x 8.39%).
Step 3: Determine the Cost of the Lowest-Cost Self-Only Coverage
The next step is to determine the cost of the lowest-cost self-only coverage offered by the employer. This includes both the employee’s share of the premium and any contributions made by the employer. If the cost of this coverage is equal to or less than the affordability threshold, then the coverage is considered affordable.
Step 4: Adjust for Inflation
The affordability percentage is adjusted for inflation each year. This means that the percentage may change for 2024. It’s important to stay updated on any changes to the affordability percentage to ensure compliance with the ACA.
Using an ACA Affordability Calculator
Calculating ACA affordability can be a complex process, especially for businesses with a large number of employees. To simplify this process, you can use our affordability calculator. This calculators take into account the employee’s household income, the cost of the lowest-cost self-only coverage, and any adjustments for inflation to determine if the coverage is affordable.
By following this practical approach to mastering ACA affordability calculations for 2024, you can ensure compliance with the ACA and provide affordable health insurance coverage for your employees.
Have you had any challenges with calculating ACA affordability? Chat with us on our site and we’d be happy to help.