A report published by the Environmental Protection Agency on drinking water found the issue in Bennettsbridge's regional water supply and means people are under threat from the bug.
The proposed remedial works will upgrade the treatment plant to include filtration plus coagulation (a type of water treatment) and ultraviolet but the works are not scheduled to be completed until June of next year.
There were 25 water supplies nationwide - including Bennettsbridge – which were found to lack adequate treatment to prevent cryptosporidium, the parasite found in human and animal waste.
It can cause a respiratory and gastrointestinal illness.
The report by the EPA also raised concerns about trihalomethanes (THMs) - a potential by-product when chlorine is used to treat supplies.
According to the HSE, studies suggest a link between long term exposure to THMs (i.e. many years) and cancer and reproductive effects but “the evidence is not conclusive”.
The Remedial Action List found Kilkenny City's (Radestown) water supply had elevated levels of THMs above the standard in the Drinking Water Regulations.
The problem is affecting 13,943 people in the area with the report saying the water supply will be “abandoned” and replaced with Troyswood public water supply by March 2020 and interim measures will involve a “new wellfield”.
Inistioge's water supply was also found to have elevated levels of THMs affecting 1,569 people.
The proposed action is to again abandon the source of the water supply and replace with the Thomastown public water supply by June, 2018.
The interim measures to be taken involve the optimisation of the disinfection system.
The report also stated there is a boil water notice in Callan which is affecting ten people.
Darragh Page, Senior Drinking Water Inspector at the Office of Environmental Enforcement, said: “The number of supplies reporting THM failures remains high, and a consistent national approach must be adopted to ensure that pesticides are prevented from entering our drinking water sources.
“We have also identified 25 supplies that require adequate treatment to prevent cryptosporidium entering the water supply.”
Across the country, 58 of the "at risk" supplies have elevated levels of THMs.
However, the report says that, overall, the quality of water in Ireland remains high and the incidence of microbiological contamination continues to fall.
Over 140,000 water test results taken from 900 public water supplies throughout Ireland were analysed for contaminants by the EPA last year.
Overall the results were very good - 99.9% passed the microbiological standards, while 99.5% passed the tests for chemicals.
Four thousand fewer people were on boil water notices at the end of 2016 compared with 2015.
However there are 87 “at risk” supplies on the EPA's Remedial Action List and 58 of these supplies have elevated levels of THMs while 25 supplies lack adequate treatment to prevent cryptosporidium entering the water supply.