New ACA Affordability Percentage for 2025 is 9.02 Percent

The IRS has set the new Affordable Care Act (ACA) affordability percentage to 9.02% for 2025. This new affordability percentage is 0.63% higher than the current 2024 affordability percentage (from 8.39% to 9.02%).

While the Internal Revenue Code originally set the affordability threshold to 9.5%, the Internal Revenue Service (IRS) retains the authority to release an adjusted percentage each year. (See 26 U.S.C. section 36B(c)(2)(C)(i).) From 2015 to 2022, the IRS set an affordability percentage above 9.5%, going as high as 9.86% in 2019. For 2023, the IRS dropped the affordability percentage below 9.5% for the first time by setting it at 9.12% and then dropped it even lower at 8.39% for 2024.

Applicable large employers are advised to check whether their offers of employer-sponsored health coverage are affordable using the 9.02% threshold. To determine whether an offer of health coverage is affordable, an employer must run an affordability calculation to determine whether an employee’s “Required Contribution” toward the premium for the lowest cost employee-only coverage exceeds or does not exceed 9.02% (2025) of the employee’s household income for the taxable year. Since employers typically do not know the total household income of each of their employees, the ACA provides three affordability safe harbor options an employer may adopt and apply on a reasonable and consistent basis:

1. Under the Form W-2 Safe Harbor, coverage is affordable if the employee’s Required Contribution is less than or equal to 9.02% of the employee’s wages reported in Box 1 of Form W-2.
2. Under the Rate of Pay Safe Harbor, coverage is affordable if the employee’s Required Contribution is less than or equal to 9.02% of the monthly wage amount for hourly employees (the hourly rate multiplied by 130 hours), or the monthly salary for salaried employees.
3. Under the Federal Poverty Line Safe Harbor, coverage is affordable if an employee’s Required Contribution does not exceed 9.02% of the Federal Poverty Line for a single individual.

Please note that there are additional factors, such as health flex contributions and cash in lieu, that can greatly impact the amount of an employee’s Required Contribution and the affordability calculation. For more information about how to run the affordability calculation and whether your agency needs to revise its employer contribution to maintain affordable offers of health coverage, please reach out to us.