Applicable large employers (ALEs)—those with 50 or more full-time or equivalent employees—must adhere to Affordable Care Act (ACA) annual reporting rules to remain compliant regarding group health plan offerings. Below is a checklist of the five most helpful reminders ALEs should take into account as they plan for reporting on their 2022 coverage in the first quarter of 2023.

1. Adjust to a Lower Affordability Threshold

The ACA imposes an employer shared responsibility payment (ESRP) on any ALE that offers qualifying coverage to its full-time employees but for which the employee share of the cost for the lowest tier self-only coverage option is deemed unaffordable. The ACA bases affordability on an employee's household income and indexes the percentage annually for inflation.

For 2023, the affordability threshold is 9.12 percent—down from 9.61 percent in 2022. ALEs preparing for 2023 should be aware that this change will affect how much you can charge employees for health coverage and still avoid an ESRP.

2. Be Aware of the Affordability Safe Harbors

An ALE typically does not know an employee's overall household income, so federal regulators created three safe harbors you may use to judge whether an offer of coverage is affordable:

• W-2 safe harbor is based on the wages an employer reports in Box 1 of an employee's Form W-2.
  

• Rate of Pay safe harbor is based on an employee's rate of pay at the beginning of the coverage period, with adjustments permitted for an hourly...

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