Updated Affordability Percentage for ALEs for 2020 - From the Desk of Michelle Sheppard
(Posted on 08/08/19)
Summer is still in full swing, Thanksgiving is still a few months away, but updates to rules and regs have me thinking about 2020 already!

The IRS just recently announced the new affordability percentages for plan years beginning in calendar year 2020. Applicable large employers (ALEs) use the affordability percentage to help make sure that their employer-sponsored coverage is deemed “affordable” by the ACA under the Employer Shared Responsibility Provisions.

The 2020 percentage is actually a decrease from the 2019 number, dropping from 9.86% to 9.78% in 2020. It’s important to speak to those employers before renewal to review contribution models in order to make sure that the group’s offer of coverage is still in compliance with the new 2020 numbers. As a reminder, employer-sponsored coverage is generally considered affordable as long as the single rate contribution that meets minimum value for the lowest-cost plan does not exceed the affordability percentage (9.78% in 2020) of an employee’s household income. While it can be difficult to know what an employee’s household income is, the IRS provides three safe harbors that employers can use to determine affordability where the household income is unknown. Additional requirements under the Employer Shared Responsibility Provisions note that coverage must also be offered at least 95% of their full-time employee workforce and dependent children.

For more information, please contact Michelle Sheppard at msheppard@martinins.com.