Affordability Percentages Will Increase for 2021
On July 21, 2020, the IRS issued Revenue Procedure 2020-36 to index the contribution percentages in 2021 for determining affordability of an employer’s plan under the Affordable Care Act (ACA).
For plan years beginning in 2021, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.83% of the employee’s household income for the year, for purposes of both the pay or play rules and premium tax credit eligibility.
This is a slight increase from the affordability contribution percentages for 2020. As a result, some employers may have additional flexibility in setting their employee contributions for 2021 to meet the adjusted percentage.