The Internal Revenue Service (IRS) recently issued Revenue Procedure 2018-34, which included the 2019 required contribution rate to satisfy the affordability standard.
If an Applicable Large Employer (ALE) (an employer with 50 or more full-time equivalent employees in the preceding year) does not provide eligible full-time employees with affordable coverage that has a “minimum value,” they may be required to pay a penalty. Coverage is deemed affordable if the employee’s contribution for self-only coverage does not exceed a certain percentage of the employee’s household income. Additionally, the percentage also determines whether an individual is exempt from the ACA’s individual mandate penalty (if it is re-imposed by Congress) due to lack of access to affordable coverage; and the amount of an eligible taxpayer’s ACA premium tax credit.
Updated 2019 Rate
IRS Revenue Procedure 2018-34 provides the indexed rate for 2019 as 9.86% compared to 9.56% for 2018. For 2019, if an employee’s share of the cost for self-only coverage is more than 9.86% of his or her income, the coverage is deemed to not meet the affordability safe harbor and the employer may be subject to a penalty. (Click here for the IRS Revenue Procedure 2018-34.)
Plan sponsors should review the updated contribution percentages to ensure that their contribution rates satisfy the affordability criteria. If you have any questions, please contact your local Sikich professional employee benefit plans team member.