Who does this apply to?
This applies to all Applicable Large Employers (company that has an average of at least 50 full-time employees or "full-time equivalents") offering company-sponsored health insurance.
What action must I take?
There is no immediate action required.
Overview
The Internal Revenue Service (IRS) recently released Revenue Procedure 2017-36. This provides indexing adjustments for certain provisions under the Affordable Care Act (ACA). Please note the index adjustment of the minimum contribution percentage. This is used to determine whether a plan is deemed “Affordable” under the Pay or Play provisions of the ACA.
Background
Under the ACA, the employer shared responsibility rules require Applicable Large Employers (ALE) to offer affordable, minimum value health coverage to employees working more than 30 hours per week. ALEs may be liable for a penalty if an employee's share of premium for the lowest cost self-only option offered by the employer does not meet the “Affordability” threshold and the employee gets a premium tax credit for Marketplace coverage.
2018 Affordability Percentage
The 2018 affordability percentage is set at 9.56% (decreased from 9.69% in 2017). Because the 2018 affordability rate is lower than the 2017 rate, ALEs may need to reduce their employees' share of premium contributions to maintain affordable coverage.
Actual Maximum Monthly Contribution
For reference, following are the maximum monthly contributions using the Rate of Pay safe harbor in California and the Federal Poverty Line safe harbor.
| 2018 Minimum Wage |
Hours per Month |
Affordability % |
Maximum Monthly Contribution |
| $11.00 (26 employees or more) |
130 |
9.56% |
$136.70 |
| $10.50 (25 employees or less) |
130 |
9.56% |
$130.56 |
If you are using the FPL safe harbor, please note the chart below.
| Calendar Year |
Prior Year FPL |
Affordabilty % |
Maximum Monthly Contribution |
| 2018 |
$12,060 |
9.56% |
$96.08 |
Penalty
Applicable large employers that fail to provide "affordable coverage" in 2018 are liable for a penalty of $3,480 per each full-time employee whose coverage was either not affordable or did not provide at least minimum value.
