IRS to adjust affordability percentage and penalty amounts

IRS to adjust affordability percentage and penalty amounts

Bulletin Type: 
Health Care Reform

The IRS announced in Notice 2015-87 that it intends to increase the percent used in each of the three affordability safe harbors to 9.66% for plan years beginning in 2016.

The safe harbors are used to determine if an employer meets the Affordable Care Act (ACA) affordability requirement to provide coverage at a cost not to exceed 9.5% of one of the following:

  • Form W-2 wages (Box 1 wages)
  • Rate of pay (hourly rate X 130)
  • Federal poverty level (100% of FPL)

The Notice also published the 2015 and 2016 penalty amounts for employers subject to a shared responsibility penalty. For 2015, the penalty for not providing minimum essential coverage to a significant percentage (70% for 2015; 95% for 2016) of full-time employees is $2,080 annually ($173.33 per month) per full-time employee.

For each full-time employee who doesn’t receive minimum value or affordable coverage and who receives subsidized coverage through the Health Insurance Marketplace the penalty is $3,120 annually ($260 per month). For 2016, the penalties are $2,160 and $3,240 annual, respectively.

For more information, please contact your Bukaty Companies Benefits Consultant at 913.345.0440. As always, we appreciate your business.