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Plan Design Changes To ACA
ACA Affordability Standard
As of 2025, the ACA affordability threshold is 8.39% of an employee’s household income. Applicable Large Employers (ALEs) must ensure that at least one health plan offered to full-time employees meets this affordability standard to avoid Employer Shared Responsibility penalties.
Health FSA Limits
For 2025, the Health FSA contribution limit is $3,200 per employee. Employers may also contribute up to $640 in additional funds without matching contributions. Note: This applies to health FSAs only, not dependent care FSAs.
Non-Grandfathered Plans
If your plan was created after March 23, 2010—or has lost grandfathered status, it is considered a non-grandfathered plan. These plans must comply with all ACA mandates, including:
- Providing an external appeals process
- Covering preventive care without cost-sharing
- Complying with essential health benefits standards
Out-of-Pocket Maximums
For 2025, the out-of-pocket maximums for ACA-compliant plans are:
- $9,450 for self-only coverage
- $18,900 for family coverage
These limits apply to in-network essential health benefits and are updated annually by HHS.
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ACA Applicable Large Employer Status Requirements
Penalties For Non-Compliance With ALE
For 2025, an ALE that fails to offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents may face a penalty of $2,970 per full-time employee, minus the first 30 employees.
If coverage is offered but deemed unaffordable or lacking minimum value, the penalty may be $4,460 per affected employee who receives a premium tax credit through the Marketplace.
Ensure Health Coverage Is Affordable for Employees
The 2025 ACA affordability percentage is 8.39%, down from previous years. ALEs may use one of the following three affordability safe harbors to assess compliance:
- W-2 Safe Harbor
- Rate of Pay Safe Harbor
- Federal Poverty Line Safe Harbor
Employers should apply the most advantageous safe harbor to avoid penalties.
[See latest IRS guidance on affordability thresholds and safe harbors]
Comply With Employer Shared Responsibilities
Under the ACA, ALEs must either:
- Offer affordable health insurance with minimum value to all full-time employees and their dependents
OR - Pay an Employer Shared Responsibility penalty
The mandate applies to employers with 50 or more full-time equivalent employees. Coverage must meet both affordability and minimum value standards to avoid penalties.
Read more on the SHRM website here
Determine Number Of Full-Time Employees
To determine whether your business qualifies as an ALE:
- Calculate all full-time employees (30+ hours/week)
- Add up monthly hours of part-time employees (capped at 120 hours per person), then divide by 120
- Add the result to your full-time headcount
If the total equals 50 or more full-time equivalent employees, you’re considered an ALE.
Read more on the IRS website here.
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Requirements For Reporting And Disclosure
ALE Forms 1094-C And 1095-C
Employers must file Form 1094-C (transmittal) and Form 1095-C (employee statements) to report health coverage offers.
Recent updates:
- Individual Coverage HRAs require codes 1T and 1U on 1095-C
- The due date to furnish Form 1095-C to employees is typically March 1 (if February 28 falls on a weekend or holiday)
Download forms 1094 & 1095 C here
Summary Of Benefits and Coverage (SBC)
The SBC is a snapshot of a health plan’s costs, benefits, covered health care services, and other features that are important to consumers. SBCs also explain health plans’ unique features like cost-sharing rules and include significant limits and exceptions to coverage in easy-to-understand terms.
W-2 Reporting (Optional For Sub-250 Forms)
Employers who file 250 or more W-2s must report the cost of employer-sponsored health coverage in Box 12 using code DD.
This is optional for employers with fewer than 250 W-2s, unless otherwise mandated by the IRS
Marketplace Notice Within 14 Days of Hire
All employers subject to the Fair Labor Standards Act (FLSA) must provide new hires with a Marketplace Notice that informs them about coverage options available through the Health Insurance Marketplace.
This notice must be provided within 14 days of an employee’s start date, even if health coverage is already offered.
Click here for more guidance from SHRM.