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ACA Affordability Limits Increased for 2019

As Published in the December, 2018 Issue of the PELRAS Newsletter

Published on: Sat 1st Dec, 2018 By: David E. Mitchell

As the days grow colder and darker, many employers focus on changes in Affordable Care Act (“ACA”) enforcement that will take effect in the New Year. In some welcome news for employers, the IRS has announced that the affordability limit, which measures the percentage of an employee’s household income that the employee can be required to contribute towards healthcare before coverage is deemed to be unaffordable, has increased from 9.56% in 2018 to 9.86% for 2019.

The ACA itself defines unaffordable coverage as that which involves an employee contribution that exceeds 9.5% of an employee’s household income. Related regulations permit adjustments in that amount and allow employers to measure affordability by using rate of pay, W-2 income or the federal poverty level instead of household income. In 2018, Large Employers are subject to a $3,480 penalty for each employee who is offered unaffordable coverage and instead obtains coverage through an ACA Marketplace or Exchange and receives a tax credit or subsidy for that coverage.

Although the health care contributions for most full-time employees will not come close to the 9.86% limit, contributions of some “part-time” employees who are deemed to be full-time under the ACA because they work 30 or more hours per week could approach or exceed that limit. The upward adjustment in the affordability limit gives employers more room and makes it less likely that they will be penalized for offering coverage that is not affordable. Stay tuned for future issues of the PELRAS update newsletter for further Affordable Care Act developments.