2020 ACA Affordability Contribution Percentage Released
Under the ACA, coverage offered to FT employees must be affordable by ACA standards or a penalty applies with respect to any employee in a public Exchange with a tax credit (the 4980H(b) penalty). The ACA permits employers to determine affordability based on certain safe harbor methods as a proxy for household income. The employee contribution for single only coverage under the least expensive plan offered to the employee must not exceed the applicable contribution percentage.
The 2020 maximum employee contribution percentage has just been announced in IRS Revenue Procedure 2019-29 – it will be 9.78%. This new percentage is effective for plan years beginning on or after 1/1/20 and is a decrease from the current percentage of 9.86 for plan years beginning in 2019.
Employers should review their affordability calculations for 2020. Employers that set employee contributions at, or nearly at, 9.86% for this year will need to adjust 2020 employer/employee contributions accordingly.