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Benefits Blog: ACA Affordability Percentages Down for 2022

The federal Affordable Care Act (ACA), through Internal Revenue Service (IRS) guidelines, has adjusted its affordability percentages downward in 2022, meaning that employers may need to change some of their employee contribution levels.

On August 20, 2021, the IRS issued Revenue Procedure 2021-36 to index the contribution percentages in 2022 for determining affordability of an employer’s plan under the ACA.

For plan years beginning in 2022, employer-sponsored coverage will be considered affordable if the employee’s required contributions for self-only coverage does not exceed the following:

  • 61% of the employee’s household income for the year for purposes of both the pay-or-play rules and premium tax credit eligibility; and
  • 09% of the employee’s household income for the year for purposes of an individual mandate exemption (adjusted under separate guidance). Although this penalty was reduced to zero in 2019, some individuals may need to claim an exemption for other purposes.

The updated affordability percentages are effective for taxable years and plan years beginning on Jan. 1, 2022.This is a significant decrease from the affordability contribution percentages for 2021, which had been set at 9.83% and 8.27%.  As a result, some employers may have to lower their employee contributions for 2022 to meet the adjusted percentage.Under the ACA, the affordability of an employer’s plan may be assessed in the following three contexts:

  • The employer shared responsibility penalty for applicable large employers (also known as the pay-or-play rules, or employer mandate).
  • An exemption from the individual mandate tax penalty for individuals who fail to obtain health coverage.
  • The premium tax credit for low-income individuals to purchase health coverage through an Exchange.

Although all of these provisions involved an affordability determination, the test for determining a plan’s affordability varies for each provision.Understand where your organization falls within these ACA guidelines.  Contact the Benefits Team at The Reschini Group for more information.

Copyright 2022 The Reschini GroupThe Reschini Group provides these updates for information only, and does not provide legal advice.  To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.

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Benefits Blog: Are you an ALE?

The definition of what constitutes an “applicable large employer,” or ALE, can have a significant impact on how that enterprise must arrange for and cover the cost of health care coverage.  Be sure you know whether your organization qualifies as an ALE in the eyes of the federal government, especially the Internal Revenue Service.

The Affordable Care Act (ACA) requires ALEs to offer affordable, minimum value health coverage to their fulltime employees or pay a penalty. This employer mandate is also known as the “employer shared responsibility” or “pay or play” rules.To qualify as an ALE, an employer must employ, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. All employers that employ at least 50 full-time employees, including FTEs, are subject to the ACA’s employer shared responsibility rules, including for-profit, nonprofit and government employers.A Full-Time Employee is an individual that works, on average, 30 or more hours of service each week. For this purpose, 130 hours in a calendar month is treated as the monthly equivalent of 30 hours of service per week.Equivalent Full Time Employee counts are determined by looking at part-time employees. Hours worked by employees with fewer than 30 hours per week must be counted—and then divided by 120 per month—to determine the number of FTEs. The number of FTEs is then added to the actual full-time employee countAs you might expect, the definitions surrounding what constitutes affordable, minimum value health coverage can become intricate and technical, as well.  But if you’re an ALE, it’s your responsibility to know the rules and abide by them.Contact the Benefits Team at The Reschini Group for more information and guidance.

Copyright 2020 The Reschini GroupThe Reschini Group provides these updates for information only, and does not provide legal advice.  To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.

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