IRS Reduces Affordability Percentages for 2018

Compl Obs Header Alert_2016June 8, 2017

Announced in IRS Revenue Procedure 2017-36, for plan years beginning in 2018, employer-sponsored health plan coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.56 % of the employee’s household income for the year, for purposes of both the pay or play rules and premium tax credit eligibility. For purposes of an individual mandate exemption, the cost of coverage must not exceed 8.05% of an employee’s household income for the year (adjusted under separate guidance).

This is the first time since the implementation of the ACA rules that the affordability contribution percentages have been reduced.

As a reminder, the ACA’s employer shared responsibility or “pay or play” rules require applicable large employers (ALEs) to offer affordable, minimum value health coverage to their full-time employees (and dependents) or pay a penalty. ALEs determining whether the coverage they offer is affordable, in order to prevent these penalties, may continue to use one of three affordability safe harbors to make this determination. The three safe harbors measure affordability based on Form W-2 wages, the employee’s rate of pay or the federal poverty line (FPL) for a single individual.

As you are determining your employee contributions for the 2018 plan year, keep in mind this new reduced percentage. For those who have already determined your employee contributions for next year, please review your rates to determine if adjustments need to be made.

Please contact your AssuredPartners Benefits Team if you have questions or need assistance with this topic or other compliance matters

Information contained herein is for educational and/or informational purposes only. The information provided may change over time as the laws and regulations change. This information is not, nor is it intended to be, legal advice and each employer or client should seek their own legal counsel for guidance regarding individual situations.

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