The Pay or Play Percentage Increase for 2025

The Affordable Care Act (ACA) requires large employers to offer affordable health insurance coverage to their full-time employees or face a penalty known as the “Pay or Play” tax. This tax is based on the employer’s average monthly wage (AMW) and the number of full-time employees.  The affordability rate for employer-sponsored health coverage will increase from 8.39% to 9.02% of an employee’s household income for the 2025 calendar plan year.

What Does This Mean for Employers?

• Higher Penalties: Employers who fail to offer affordable coverage will face significantly higher penalties in 2025 compared to previous years.
• Increased Costs: The increased penalty may lead to higher costs for employers, which could potentially be passed on to employees in the form of higher premiums or reduced wages.
• Need for Compliance: Employers must carefully review their health insurance offerings to ensure they meet the ACA’s affordability requirements.

To Avoid Penalties, Employers Should:

• Offer Affordable Coverage: Ensure that the most affordable health insurance plan offered meets the ACA’s affordability standards.
• Track Employee Hours: Accurately track employee hours to determine who qualifies as a full-time employee.
• Communicate with Employees: Inform employees of their health insurance options and the consequences of not enrolling.
• Seek Professional Advice: Consult with us or an HR professional to ensure compliance with the ACA’s requirements.