Employers subject to the shared responsibility penalty within the Affordable Care Act (ACA) must ensure that the health coverage they offer to employees provides minimum value and is affordable.
For 2015, employers will satisfy the affordability requirement if the amount of premium employees pay for the lowest-cost, self-only coverage does not exceed 9.56% of the employee’s household income, up from 9.5% in 2014. The increase was released recently in IRS Revenue Procedure 2014-37.
ACA’s statutory language requires the IRS to adjust the affordability percentage every year by the ratio of healthinsurance-premium to income growth in the preceding calendar year.
Due to the employer mandate delay, employers who exceeded the affordability ceiling were not penalized in 2014. In 2015, employers with 100-plus employees must meet the 9.56% income threshold or face the shared responsibility penalty. Employers with 50-99 employees aren’t subject to the penalty until 2016.
Because employers generally don’t have access to employee household income, the IRS created three affordability safe harbors (see below) employers can use to satisfy the affordability test.
The IRS also adjusted the household income level to qualify for an exemption from the individual mandate penalty. Under ACA, a penalty for non-coverage will not be levied if the lowest cost, self-only coverage exceeds 8% of household income in 2014. In 2015 the percentage is 8.05%.
If you have questions, please contact your Bukaty Companies Benefits Consultant at 913.345.0440.
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