Affordability Percentages Will Increase for 2019

The following is an article overview. Click here to view the full compliance brief.

Overview

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).

Action Steps

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.

Highlights

  • For plan years beginning in 2019, the ACA’s affordability contribution percentages are increased to:
    • • 9.86 percent under the pay or play rules
    • • 9.86 percent under the premium tax credit eligibility rules
    • • 8.3 percent under an exemption from the individual mandate

Important Dates

May 21, 2018
Rev. Proc. 18-34 increased the ACA’s affordability contribution percentages for 2019.

January 1, 2019
The updated percentages are effective for taxable plan years beginning Jan. 1, 2019.

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This compliance update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.