The IRS changed the ACA affordability percentage to 9.61% for 2022. The affordability percentage was 9.83% in 2021. This change means employers may have to reduce the required employee premium contribution amount for the lowest-cost single-only coverage medical plan.
In 2022, an employer will meet the ACA federal poverty line affordability safe harbor only if their employees are required to pay no more than $103.14 per month for a single-only medical plan option. In 2021, employers could charge up to $104.53 per month for coverage to be deemed affordable.
To avoid potential ACA penalties, employers should pay attention to the lower affordability limit when setting contribution levels for open enrollment for the 2022 plan year. The most straight-forward way to ensure affordability compliance is for an employer to offer a medical plan option to full-time employees that costs the employee not more than $103.14 per month for single coverage.
An employer may be subject to two penalties under the ACA rules. The first penalty applies when an applicable large employer does not offer minimum essential coverage providing minimum value to at least 95% of its full time employees in a calendar month. The second penalty applies to an employer that does offer coverage to 95% of its full time employees but the coverage is not affordable or does not provide minimum value and a full time employee receives subsidized coverage in the Marketplace instead of taking the employer’s coverage.
Not providing affordable coverage can have financial consequences for employers. Therefore, employers should consider the employee’s share of the cost of single-only coverage in light of the reduced affordability percentage in 2022.
