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The IRS recently announced that the contribution percentages used to determine affordability for an employer’s health plan under the Affordable Care Act will decrease. For plan years starting in 2022, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:
- 61% of the employee’s household income for the year both the pay or play rules and premium tax credit eligibility
- 09% of the employee’s household income for the year under an exemption from the individual mandate. Although this penalty was reduced to zero in 2019, some individuals may need to claim an exemption for other purposes.
The updated percentages are effective for taxable years and plan years beginning January 1, 2022. This is a significant decrease from the affordability contribution percentages for 2021. As a result, some employers may need to lower their employee contributions for 2022 to meet the adjusted percentage.
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