More updates coming to the ACA! The IRS is making changes to the Affordable Care Act’s affordability percentage in 2019.
What does that mean to you as an employer? The affordability percentage determines if an employer’s offering of health care coverage for its employees and their dependents is affordable based upon a certain percentage of their annual household income. Let’s explore.
Currently in 2018, the percentage required for “affordable” employer health insurance is 9.56%. In 2019, the IRS will raise the percentage to 9.86%. This means that to be an “affordable” health care plan in 2019, contributions for employee-only coverage cannot exceed 9.86% of the employee’s household income.
This new rate will become effective for taxable years and plan years starting after December 31, 2018.
Large employers (those with at least 50 or more full time employees) are required by the Shared Responsibility Mandate (pay or play) to offer affordable group health coverage that meets certain minimum value requirements to its employees and their dependents. If they fail to comply with these requirements, they can face steep penalties (4980H(b) penalty).
Prior to this new adjustment, individuals were exempt from the individual mandate penalty if the coverage was “unaffordable” to them, meaning the required contribution exceeded 8% of their annual household income. With the individual mandate now being reduced to zero, and therefore eliminated, there is no longer a required contribution percentage.