IRS Decreases Federal Affordability Percentage to 9.61% for Plan Years beginning in 2022
Per the Affordable Care Act (ACA), Applicable Large Employers (ALEs), employers with 50 or more full time and/or full-time equivalent employees, are required to offer affordable minimum value coverage to all full-time employees and their dependents. To determine affordability for 2022, ALEs must offer at least one plan that costs employees less than 9.61% of their household income. ALEs can use one of three “safe harbors” to determine affordability: Rate of Pay, W-2 or Federal Poverty Level (FPL).
In the event it is determined that the ALE’s coverage does not meet the necessary affordability requirements, or a full-time employee receives a subsidy through the Marketplace Exchange, it may be subject to one of two penalties outlined by the IRS. Employers should be mindful of the Federal Affordability Percentage and prepare to comply ahead of the 2022 plan year.