The IRS has announced 2018 indexing adjustments for two key percentages under the Affordable Care Act (ACA). They are as follows:
1. Affordability. This is the required contribution percentage used to determine whether employer-sponsored health coverage offered by an applicable large employer (ALE) is “affordable” for purposes of employer shared responsibility. The amount had increased from the 9.5% baseline to 9.69% for 2017 but will decrease to 9.56% for 2018.
2. Premium tax credits. A percentage is used to determine the amount individuals eligible for premium tax credits must contribute toward the cost of coverage obtained through a Health Insurance Marketplace (also referred to as an “exchange”). It will also see small decreases. The adjusted percentage, ranging from 2.01% to 9.56%, varies across household income bands.
The IRS announcement included a reminder that the required contribution percentage used to determine whether individuals are exempt from individual shared-responsibility penalties also decreased to 8.05% for 2018. (Individuals are exempt if the amount that they would be required to pay for minimum essential coverage exceeds a particular percentage of actual household income for a taxable year.) The percentage was announced in December 2016 regulations issued by the Department of Health and Human Services, establishing the 2018 benefit and payment parameters.
Clearly, adjustments to the affordability percentage will be of interest to ALEs and their advisors. Failure to offer affordable, minimum value coverage to full-time employees may result in employer shared-responsibility penalties.
Employer shared responsibility will remain the law unless and until legislation is passed to eliminate it.
Please contact Bederson with any questions you may have regarding these newly announced adjustments.