On April 12, 2016, the Internal Revenue Service (IRS) released new guidance on the percentages used to determine what is considered “affordable” health coverage.
Under the Affordable Care Act (ACA), the affordability of an employer’s plan may be assessed for the employer shared responsibility penalty, the individual mandate and the premium tax credit. The affordability test varies for each provision.
For plan years beginning in 2017, the ACA’s affordability contribution percentages will be adjusted to the following percentages:
(those that employ 50 full-time employees or full-time equivalents) to offer coverage that does not exceed 9.69 percent of an employee’s household income for the year.
Failing to meet any of these requirements could trigger significant financial penalties for your business. Remember that these percentages only apply to self-only coverage, and do not include any additional costs for family coverage.
If you offer multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement set by the ACA.
These new percentages are effective for taxable years and plan years beginning after Dec. 31, 2016.