Running a business isn’t easy, especially when you’re trying to do right by your team and offer solid health benefits without throwing your budget off balance. And if you’re on the employee side, you’ve probably noticed your health plan getting a little more expensive each year and wondered what’s behind it. One piece of that puzzle is something called the Affordable Care Act’s affordability percentage—a number that quietly affects both what employers offer and what employees pay.
For 2025, the IRS has bumped that percentage up to 9.02%. It might not sound like much, but even a small change can have real consequences when it comes to meeting the rules and staying penalty-free.
In this guide, we’ll break down what ACA affordability percentage means, how it works, and how it can shape decisions for both businesses and workers. We’ll will discuss how to figure out if a plan is considered affordable, look at the different ways to measure it, and talk about what happens if you miss the mark!
Read also: What is the Affordable Care Act (ACA) and How to Get ACA Health Insurance?
What’s the ACA Affordability Percentage All About?
The ACA affordability percentage is a benchmark in the Affordable Care Act that decides if employer health plans are affordable enough for workers or not.
How It All Works
The ACA says large firms—those with 50 or more full-time workers, known as Applicable Large Employers (ALEs)—have to offer health insurance that’s affordable and worth something. The 2025 ACA affordability percentage, pegged at 9.02%, sets the bar for “affordable.” If an employee’s share of the cheapest self-only plan costs more than 9.02% of their household income, the plan’s not affordable, and the employer could be on the hook for penalties. This number gets tweaked yearly based on inflation, and it’s up from 8.39% in 2024, reflecting shifts in wages and health costs.
Why You Should Care
For bosses, the ACA affordability threshold for 2025 is a must-know to steer clear of the ACA affordability penalty for 2025, which can sting at $4,350 per employee who grabs a marketplace subsidy. For workers, it decides if you can get tax credits for cheaper coverage on the Health Insurance Marketplace. If your employer’s plan costs too much, you might ditch it for a marketplace option, which could cost your boss. It’s a juggling act—employers want to keep premiums low, but workers need plans that don’t break the bank.
How the 2025 ACA Affordability Percentage Works
This section gets into the nitty-gritty of how the ACA affordability percentage for 2025 operates, including how it’s used and what’s different this year.
The 9.02% Line
For 2025, the IRS locked in the ACA affordability percentage at 9.02%, up from 8.39% in 2024. This means an employee’s contribution for the lowest-cost self-only plan can’t go over 9.02% of their household income for the plan to count as affordable. Since bosses don’t usually know your full household income, the IRS gives three safe harbors to make it easier, which we’ll get into soon. The bump comes from rising healthcare costs outpacing income growth, per National Health Expenditure Accounts data.
What’s New for 2025
The climb from 8.39% to 9.02% is the first hike in four years, after dropping from 9.83% in 2021. This gives employers a bit more room to ask employees to chip in more while staying on the right side of the rules, but it could mean higher premiums for workers. The ACA affordability penalty for 2025 also dipped to $4,350 per employee who gets a subsidy, down from $4,460 in 2024, thanks to inflation adjustments.
How to Figure Out ACA Affordability for 2025
Crunching the numbers for affordability is where things get real. This section walks you through how to calculate ACA affordability for 2025, focusing on the three IRS safe harbors that keep it doable for employers.
The Household Income Puzzle
Ideally, you’d check if a plan’s affordable by comparing the employee’s premium to their household income. But employers aren’t digging into your spouse’s earnings or your weekend gig. That’s why the IRS came up with safe harbors: Federal Poverty Line (FPL), Rate of Pay, and Form W-2. These let you use numbers that are easier to grab.
Federal Poverty Line (FPL) Safe Harbor
The FPL safe harbor’s the easiest way to go. For 2025, your plan’s affordable if the employee’s monthly premium for self-only coverage is $113.20 or less in the mainland U.S., based on the 2024 FPL of $15,060 (2025’s number comes out early next year). In Alaska, it’s $141.38; in Hawaii, $130.11. Employers like this one because it’s a single number for everyone, making paperwork a breeze.
Rate of Pay Safe Harbor
This works well for folks paid hourly or with changing hours. Take the employee’s hourly rate—or monthly salary for salaried workers—multiply by 130 hours (the ACA’s full-time mark), and keep the premium under 9.02% of that. Say Maria earns $15 an hour; her monthly “wages” are $1,950 ($15 × 130). At 9.02%, her premium can’t top $175.89. It’s simple but needs careful tracking of rates.
Form W-2 Safe Harbor
The W-2 safe harbor uses an employee’s Box 1 wages for the year, but it’s tougher since you don’t know final wages until December. If the premium’s 9.02% or less of those wages, you’re good. This one’s less popular because it’s hard to plan ahead, but it can work for steady salaried workers. Most stick with FPL or Rate of Pay to keep things smooth.
A Quick Example
Take Sam, a warehouse worker in Texas earning $20 an hour. His employer uses the FPL safe harbor, so Sam’s premium for the cheapest self-only plan needs to stay under $113.20 a month. If it’s $125, the plan’s not affordable, and Sam could get a marketplace subsidy, possibly costing his employer $4,350. If they switch to Rate of Pay, Sam’s monthly “wages” are $2,600 ($20 × 130), so the premium could hit $234.52 (9.02% of $2,600) and still pass. This shows picking the right safe harbor can make or break compliance.
Those ACA Affordability Penalties for 2025
Penalties are the stick that keeps employers on their toes. This section explains the ACA affordability penalty for 2025 and how to stay out of trouble.
The Two Big Penalties
The ACA has two penalties under IRC Section 4980H:
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A Penalty (The Big One): If an employer skips offering minimum essential coverage to at least 95% of full-time workers and one gets a marketplace subsidy, it’s $2,900 per full-time employee (minus the first 30) for 2025. This is about offering coverage, not affordability.
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B Penalty (The Smaller Sting): If you offer coverage but it’s not affordable or lacks minimum value, and an employee gets a subsidy, it’s $4,350 per employee affected. This ties directly to the 2025 ACA affordability percentage.
Dodging the Hit
To avoid the B penalty, make sure your cheapest self-only plan meets the 9.02% threshold using a safe harbor. Check employee contributions during open enrollment and team up with a benefits pro to keep plans ACA-friendly. The FPL safe harbor’s $113.20 cap is a safe bet for many to stay compliant without overthinking it.
Tips for Employers to Get It Right
This section shares practical pointers for employers dealing with the ACA affordability threshold for 2025.
Check Your Plans Early
With open enrollment around the corner, look at your 2025 plan contributions and make sure they fit the 9.02% rule. If you’re using the FPL safe harbor, keep premiums at or below $113.20 for mainland workers. For non-calendar-year plans, you can lean on the 2024 FPL for six months after the 2025 FPL drops, giving you some breathing room.
Pick the Best Safe Harbor
The FPL safe harbor’s a cinch for setting one price, but Rate of Pay’s better for workers with different hours. Run the numbers for both to see what keeps costs affordable for most of your team. Skip W-2 unless your payroll’s rock-steady—it’s a pain to guess wages early.
Talk to Your Team
Workers might not get why their premiums are creeping up. Be straight with them about the ACA affordability percentage for 2025 and how you’re keeping plans legal. A little honesty goes a long way to help them plan their budgets.
What Workers Need to Know
This section’s for employees, who feel the pinch of the ACA affordability percentage too.
Your Share of the Bill
The 9.02% threshold means your employer’s cheapest self-only plan shouldn’t cost more than 9.02% of your household income—or a safe harbor number. If it’s over that, you might qualify for marketplace subsidies, but check with HR to see where your plan stands.
Looking at Marketplace Plans
If your employer’s plan is too pricey, you can shop for coverage on the Health Insurance Marketplace. Enhanced tax credits, good through 2025, cap marketplace premiums at 8.5% of income for many, which could beat an expensive work plan. Compare both to find the best deal.
Wrapping It Up: Get Ahead of ACA Rules
The 2025 ACA affordability percentage of 9.02% is a big deal for employers and workers alike. For businesses, it’s about offering health plans that hit the affordability mark to avoid the ACA affordability penalty for 2025 while keeping costs in check. For employees, it’s about knowing if your plan’s affordable or if the marketplace offers a better deal.
Using safe harbors like FPL ($113.20 monthly cap) or Rate of Pay makes compliance easier, and employees can weigh their options with clear info. Start checking your plans now, talk to a benefits advisor, or look into marketplace subsidies if you’re a worker. Getting a grip on how to calculate ACA affordability for 2025 keeps surprises at bay and decisions sharp. So, what’s your next move—adjusting your plan or checking out subsidies?
Frequently Asked Questions
What’s the ACA affordability percentage for 2025?
It’s 9.02%, up from 8.39% in 2024. This sets the limit for what an employee can pay for the cheapest self-only plan—9.02% of their household income—to keep it affordable under the ACA.
How do I figure out ACA affordability for 2025?
Use one of three IRS safe harbors: FPL (premium ≤ $113.20/month based on 2024 FPL of $15,060), Rate of Pay (9.02% of hourly rate × 130 hours), or W-2 (9.02% of Box 1 wages). FPL’s the easiest for most businesses.
What’s the ACA affordability penalty for 2025?
If your plan’s not affordable and an employee gets a marketplace subsidy, you could owe $4,350 per employee affected. There’s also a $2,900 penalty per full-time worker if you don’t offer coverage to 95% of them.
Who needs to care about the ACA affordability threshold for 2025?
Big employers with 50+ full-time workers (ALEs) have to follow these rules. Workers should check if their plan costs more than 9.02% of their income to see if they can get marketplace tax credits.
Can workers get marketplace subsidies if their employer’s plan isn’t affordable?
Yup, if the cheapest self-only plan from your job costs more than 9.02% of your household income, you might qualify for tax credits on the Health Insurance Marketplace to lower your premiums.
