On May 21, 2018, the Internal Revenue Service (IRS) issued Revenue Procedure 2018-34 to index the contribution percentages in 2019 for purposes of determining affordability of an employer’s plan under the Affordable Care Act (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).
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.
Applicable Large Employers (ALE's) are required to offer full-time employees (and dependents) with minimum value health coverage or pay a penalty. For 2019 the affordability contribution percentage is increasing to 9.86. This means that for an employers group health plan to be considered affordable and compliant with ACA pay or play rules an employees required contribution for self-only coverage cannot exceed 9.86% of the employees household income for that tax year.
As you will see in the chart below this increase is the largest to-date, since the affordability rule was put in place in 2014.
For additional information please read the complete ACA Compliance Bulletin