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IRS Announces Indexing Adjustments for 2023 ACA Affordability and Premium Tax Credit Determinations

EBIA  

EBIA  

Rev. Proc. 2022-34, 2022-33 I.R.B. ___ (Aug. 15, 2022)

Available at https://www.irs.gov/pub/irs-drop/rp-22-34.pdf

The IRS has announced 2023 indexing adjustments for important percentages under the Affordable Care Act (ACA). The required contribution percentage is used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility under Code § 4980H. It is adjusted from the 9.5% baseline to 9.12% for plan years beginning in 2023. (This is a decrease from 9.61% for 2022; see our Checkpoint article.) The percentages used to determine the amount of household income that individuals who are eligible for premium tax credits must contribute toward the cost of Exchange coverage vary across household income bands. The 2023 percentages range from 1.92% to 9.12% (an increase from the 2022 range of zero to 8.5%).

EBIA Comment: Failure to offer affordable, minimum value coverage to full-time employees may result in employer shared responsibility penalties, so the adjustments to the affordability percentage will be of interest to applicable large employers and their advisors. For 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA) expanded the ACA premium tax credit by eliminating the upper income limit for eligibility and decreasing, in all income bands, the percentage of household income required to be contributed for Exchange coverage (see our Checkpoint article). Unless this expansion is extended, the upper income limit (400% of the federal poverty line (FPL)) will return for 2023 and the percentage that must be paid for Exchange coverage will increase across household income bands as reflected in this revenue procedure. For more information, see EBIA’s Health Care Reform manual at Sections XXI.B.4 (“Exchange Eligibility Determinations”), XXI.G (“Premium Tax Credits”), and XXVIII.E (“Assessable Payment (Penalty Tax) When Inadequate Coverage Offered to Full-Time Employees and Dependents (the ‘Subsection (b) Penalty’)”).

Contributing Editors: EBIA Staff.

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