Updated guidelines set the 2023 federal poverty level (FPL) at $14,580 (up from $13,590 in 2022) for a person living in the mainland US, but $16,770 in Hawaii and $18,210 in Alaska. Under the Affordable Care Act (ACA), the FPL can affect employer shared-responsibility (ESR) play-or-pay assessments in two ways:
- Premium tax credits. Individuals with household incomes between 100% and 400% of the FPL are potentially eligible to receive premium tax credits for health coverage purchased through a public exchange. ACA full-time employees' receipt of subsidized exchange coverage can trigger play-or-pay assessments. (Note that premium tax credit eligibility expanded to individuals earning more than 400% of the FPL for 2021 and 2022 under the American Rescue Plan Act (Pub. L. No. 117-2) and for 2023 through 2025 under the Inflation Reduction Act (Pub. L. No. 117-169).)
- Affordability testing. Employers can use the FPL under one play-or-pay affordability safe harbor to test whether their lowest-cost, self-only minimum essential coverage (MEC) with minimum value is affordable to employees. When conducting this test, an employer may use the FPL in effect within six months before the start of the plan year.
2023 play-or-pay FPL affordability safe harbors. The Department of Health and Human Services (HHS) issued updated FPL figures effective Jan. 12 that will apply for 2024 calendar-year plans and noncalendar-year plans beginning in 2023. Employers with calendar-year plans can’t rely on those higher FPLs for 2023 affordability testing. Instead, 2023 calendar-year plan sponsors must use the 2022 FPL amounts. As a result, the 2023 FPL affordability safe-harbor monthly employee contribution limits for the lowest-cost, self-only MEC with minimum value are as follows:
- Noncalendar-year plans beginning in 2023: $110.81, calculated as (9.12% x $14,580 FPL for 2023) ÷ 12, rounded to the nearest penny (see discussion below for a special rule)
- 2023 calendar-year plans: $103.28, calculated as (9.12% x $13,590 FPL for 2022) ÷ 12, rounded to the nearest penny
Special rule for noncalendar-year plans. Noncalendar-year plans may use the FPL in effect within six months before the first day of the plan year. For the 2023 plan year noncalendar-year plans benefit from using the higher 2023 FPL amounts.
The adjusted affordability percentage applies on a plan-year ・not calendar-year ・basis. This means noncalendar year plans beginning in 2022 will continue to use 9.61% to determine affordability in 2023 until their new plan year starts. As a reminder, for 2022 noncalendar-year plans using the mainland US FPL affordability safe harbor, the required employee contribution cannot exceed $108.83 per month, calculated as (9.61% for 2022 x $13,590 FPL in 2022) ÷ 12, rounded to the nearest penny.
Related resources
- HHS poverty guidelines for 2023 (HHS, Jan. 12, 2023)
- Employer shared-responsibility provisions (IRS, Sept. 29, 2022)
- Q&As on employer shared-responsibility provisions under the Affordable Care Act ・Affordability (see Q&A-40) (IRS, Aug. 16, 2022)
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- Public L. No. 117-169, the Inflation Reduction Act of 2022 (Congress, Aug. 16, 2022)
- Annual update of the HHS poverty guidelines for 2022 (Federal Register, Jan. 21, 2022)
- Pub. L. No. 117-2, the American Rescue Plan Act of 2021 (Congress, March 11, 2021)