IRS Reduces Affordability Percentages for 2018
In Revenue Procedure 2017-36, the IRS announced that for plan years beginning on or after January 1, 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 (down from 9.69% for 2017). This percentage is considered for both the ACA’s employer shared responsibility or “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 (down from 8.16% for 2017) (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 employer shared responsibility rules generally 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 may continue to use one of three affordability safe harbors to make this determination and try to prevent penalties. 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 Account Manager or Account Executive for additional assistance.
- 07/28/2016: What it Means if You Received a Marketplace Notice
- 05/02/2016: 4 Key Tips for ACA Guidance
- 02/23/2016: IRS Clarification on ACA Safe Harbors
- 08/08/2014: New rates for ‘affordable coverage’ under ACA Announced