The health care cost affordability percentage for 2020 has been issued by the IRS. Under the Affordable Care Act, an applicable large employer must provide affordable, minimum value coverage to its full-time employees and their dependents or pay a tax penalty. A plan is affordable if the premium for self-only coverage does not exceed a certain percentage of the employee’s household income. The IRS sets the percentage each year.
In 2020, the affordability percentage will be 9.78% which is a decrease from 2019 (9.86%). A plan will be considered affordable if its premium costs does not exceed 9.78% of an employee’s household income.
Employers should review their cost structure to make sure the reduction of the affordability percentage does not impact their employees. A reduced percentage may require an employer to reduce the amounts employees pay for single only coverage.