affordability contribution percentages

22 Jun Affordability Percentages Will Increase for 2019

The Internal Revenue Service (IRS) issued Revenue Procedure 2018-34 increasing the affordability contribution percentages.

This will index the contribution percentages in 2019 for purposes of determining affordability of an employer’s plan under Affordable Care Act’s (ACA). For plan years beginning in 2019, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:

    • 9.86 percent of the employee’s household income for the year, for purposes of both the pay or play rules and premium tax credit eligibility; and
    • 8.3 percent of the employee’s household income for the year, for purposes of an individual mandate exemption (adjusted under separate guidance).

 

Overview of the Affordability Requirement

Under the ACA, the affordability of an employer’s plan may be assessed in the following three contexts:

  • The employer shared responsibility penalty for applicable large employers (also known as the pay or play rules or employer mandate);
  • An exemption from the individual mandate tax penalty for individuals who fail to obtain health coverage; and
  • The premium tax credit for low-income individuals to purchase health coverage through an Exchange.

Although all of these provisions involve an affordability determination, the test for determining a plan’s affordability varies for each provision.

 

Important Dates

May 21, 2018 – Rev. Proc. 18-34 increased the ACA’s affordability contribution percentages for 2019.

January 1, 2019 –The updated percentages are effective for taxable plan years beginning Jan. 1, 2019.

 

Action Steps

These updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2019. This is a significant increase from the affordability contribution percentages for 2018. As a result, some employers may have additional flexibility with respect to their employee contributions for 2019 to meet the adjusted percentage.

 

More Information

Download our complimentary ACA Compliance Bulletin for a complete overview including affordability adjustments and premium tax credit charts.

Have questions?  Contact Barrow Group’s employee benefits experts to discuss selecting the right mix of employee benefits for your full-time employees and their dependent children.  Click here to contact us or email us at benefitsteam@barrowgroup.com today.

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