Keeping up-to-date with changing requirements around the Affordable Care Act can be challenging. The maximum annual amount that you can require your employee to pay for self-only coverage is $2,883 in order to meet the W2 safe harbor for the six months the employee has been covered during his nine months of employment. Then multiply the result by 6/9 (total months offered/total months wages were earned). To determine affordability for a plan year that begins in 2022, an employer would need to take $45,000 and multiply it by 9.61% ($4,324.50). While the employee worked for nine months, they had a three-month waiting period for benefits so were only offered coverage for the last six months of the year. In order to claim the W2 safe harbor, the following formula is generally used: W2 Box 1 Wages multiplied by 9.61% with an adjustment for partial year coverage.įor example: An employee’s Box 1 wages are $45,000 for nine months of employment. The reason for this is because you need the amount in W2 Box 1 for the affordability calculation. The W2 safe harbor can be the trickiest safe harbor to use because it cannot be determined until the end of the year. For calendar year plans to satisfy the FPL safe harbor in 2022, monthly premiums cannot exceed $103.15, which is 9.61% of the applicable FPL of $12,880. Under the Federal Poverty Line (FPL) affordability safe harbor in 2022, an employee’s premium payment can’t exceed $103.15 per month, down from $104.53 per month in 2021 or $105.51 for non-calendar plan years using the increased FPL of $12,880.įor example: A calendar year plan in 2021 meets the FPL safe harbor* with a premium of $104.53, which is 9.83% of the applicable FPL of $12,760. Maximum monthly contributions for John Smith earning $10 per hour, plan year beginning Januand January 1, 2022:Ģ021: $10 an hour x 130 hours = $1300 X 9.83% = $127.79 maximum monthly contribution, effective for the plan year that begins between Janu– December 31, 2021Ģ022: $10 an hour x 130 hours = $1300 X 9.61% = $124.93 maximum monthly contribution, effective for the plan year that begins between Janu– December 31, 2022Įxample using Federal Poverty Line safe harbor: That result, multiplied by the 2022 affordability percentage of 9.61%, will provide you with the self-only contribution maximum for the employee under the Rate of Pay affordability safe harbor.
To determine the self-only contribution premium for hourly employees, multiply the hourly rate of pay at the beginning of the coverage period for each employee by 130 hours. Example using the Rate of Pay affordability safe harbor: Coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.61% percent of the employee’s household income. This percentage is important when setting employer contributions for self-only coverage for plans beginning on or after January 1, 2022.
On August 30, 2021, the Internal Revenue Service (IRS) issued Revenue Procedure 2021-36, decreasing the affordability percentage index from 9.83% in 2021 to 9.61% for plan years beginning in calendar year 2022.
Part of the requirements under the Affordable Care Act (ACA) is ensuring that employers offer affordable health care options to their benefits eligible employees. SUBSCRIBE IRS lowers the ACA affordability percentage for 2022
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