Tuesday, October 21, 2014

What is “Affordable Coverage”?


Employers that are required to abide by the ACA must offer "affordable coverage" to their employees. The 2014 definition of affordable coverage was 9.5% of the employee's income. Of course, this number (9.5%) has been adjusted by the IRS for the 2015 year. In 2015, the new limit is 9.56% of employee income. Also, in 2015 coverage is unaffordable for purposes of the individual mandate if it exceeds 8.05% of household income (8% originally).

This change stems from the requirement that the IRS must adjust the affordability percentage to reflect the excess of the rate of premium growth over the rate of income growth for the preceding calendar year, with each subsequent plan year being adjust accordingly. This change is not substantial, but in order to stay and be compliant, employers and individuals must know these subtle changes in the rules.

Year

Unaffordable Coverage
2014Over 9.5% of employee income (employer –sponsored coverage)
Over 8% of household income (individual mandate)
2015Over 9.56% of employee income (employer-sponsored coverage
Over 8.05% of household income (individual mandate

Source: Fox Rothschild LLP | Employee Benefits Legal Blog | New Rates for "Affordable Coverage" for 2015: Rev. Proc. 2014-37

For more information contact info@hrtactix.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.