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Changes to ACA Affordability Contribution Percentages

affordability contribution percentages

1 minute read

The IRS recently announced that the contribution percentages used to determine affordability for an employer’s health plan under the Affordable Care Act will increase. For plan years starting in 2021, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:

  • 83% of the employee’s annual household income, for purposes of both the pay or play rules and premium tax credit eligibility; and
  • 27% of the employee’s annual household income, for purposes of an individual mandate exemption. Although the penalty was reduced in 2019 to $0, some people may need to claim an exemption for other purposes.

The percentages are effective for taxable years and plan years beginning on January 1, 2021. Note that this is a slight increase from the affordability percentages for 2020. Some public sector employers may have additional flexibility in setting their employees contributions for 2021 to meet the adjusted percentage. Download the bulletin for more information.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Aaron Casper

Aaron Casper

Aaron A. Casper, Employee Benefits Consultant at NIS (National Insurance Services), understands the unique way governmental organizations operate, manage risk and develop budgets; hence, he delivers reliable solutions for his clients without short cuts or temporary fixes. Aaron advocates for his clients and prides himself on building authentic relationships, even passing up potential short-term opportunities if it doesn’t make long-term sense for his clients. His straightforward nature, integrity and astute sense of humor are why his customers consider him a valued strategic resource. Aaron Casper is a licensed insurance agent. He specializes in health insurance consulting for Minnesota schools, cities and counties including fully insured, self-insured, and stop-loss plans. Additionally, he has experience implementing OPEB liability reduction strategies as well as ensuring his clients are ACA compliant.