For plan years beginning in 2021, the Internal Revenue Service has announced that coverage will generally be considered affordable if the employee’s required contribution for the lowest-cost self-only health plan offered is 9.83% or less of his or her household income for the taxable year. This is a slight increase from the 9.78% affordability threshold applicable for plan years beginning in 2020.
Because employers are unlikely to know an employee’s actual household income, they may use a number of IRS provided safe harbors to determine the affordability of their plan offerings.
This E-Alert is of interest to Applicable Large Employers – generally those with 50 or more full-time employees (including full-time equivalent employees). Under the ACA’s employer shared responsibility (“pay or play”) provisions, large employers may be subject to a penalty if they do not offer affordable coverage that provides minimum value to their full-time employees and their dependent child(ren).
As always, please do not hesitate to reach out to our Group Benefits team with any questions or concerns.
Disclaimer: The information contained in this message is for general informational purposes only and does not constitute legal advice.
Employee Health and Benefits
ACA Compliance
