August 5, 2014
IRS Increases Rates for “Affordable” Coverage
Beginning in 2015, applicable large employers are required, under the Affordable Care Act (“ACA”), to offer health care coverage to their full-time employees (and dependents). In order for an applicable large employer to avoid the “pay or play” penalties under the ACA, the coverage they offer to employees must be affordable and meet minimum value. Until recently, coverage was deemed affordable for pay or play purposes if an employee’s contributions for coverage did not exceed 9.5% of such employee’s income.
On July 24, 2014, the IRS released Revenue Procedure 2014-37 issuing the first adjustment to the affordability rates for 2015.
According to the IRS, premiums have grown more rapidly than incomes. As a result, the 9.5% threshold must be adjusted upward. For plan years and tax years beginning on or after January 1, 2015, the required threshold will increase to 9.56%. This means that an applicable large employer attempting to set premiums at the maximum level that will still satisfy the affordability standard should be using 9.56%, rather than 9.5%, in its safe-harbor affordability calculations.
Revenue Procedure 2014-37 also adjusts the affordability percentage for the exemption from the individual mandate. For 2014, an individual is generally exempt from the individual mandate (the requirement to have at least “minimum essential coverage” or face a tax penalty) if the premium for such coverage would exceed 8% of his/her household income. However, this IRS guidance increases the 8% threshold to 8.05% for 2015.
Contact your AssuredPartners NL Benefit Team if you have questions or need assistance with these or other compliance matters