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Indexing Adjustments for 2022 Affordability and Premium Tax Credit Determinations Announced

EBIA  

EBIA  

Rev. Proc. 2021-36, 2021-35 I.R.B. 357 (Aug. 30, 2021)

Available at https://www.irs.gov/irb/2021-35_IRB#REV-PROC-2021-36

The IRS has announced 2022 indexing adjustments for some crucial percentages under the Affordable Care Act (ACA). The required contribution percentage used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility under Code § 4980H is adjusted from the 9.5% baseline to 9.61% for plan years beginning in 2022. (This is a decrease from 9.83% for 2021; see our Checkpoint article.) The existing ACA premium tax credit was expanded by the American Rescue Plan Act of 2021 (ARPA) for taxable years 2021 and 2022 (see our Checkpoint article). The adjusted percentage for 2022 (i.e., the percentage of household income that recipients of the tax credit must pay for Exchange coverage) is the same as for 2021, and ranges from zero to 8.5%.

EBIA Comment: Failure to offer affordable, minimum value coverage to full-time employees may result in employer shared responsibility penalties, so the adjustments to the affordability percentage will be of interest to applicable large employers and their advisors. As for the premium tax credit, it had been limited to taxpayers with household income between 100% and 400% of the federal poverty line (FPL) who purchase insurance through an Exchange. However, for 2021 and 2022, ARPA eliminated the upper income limit for eligibility and increased the amount of the premium tax credit by decreasing, in all income bands, the percentage of household income that individuals must contribute for Exchange coverage. For more information, see EBIA’s Health Care Reform manual at Sections XXI.B.4 (“Exchange Eligibility Determinations”), XXI.G (“Premium Tax Credits”) and XXVIII.E (“Assessable Payment (Penalty Tax) When Inadequate Coverage Offered to Full-Time Employees and Dependents (the ‘Subsection (b) Penalty’)”). You may also be interested in our upcoming webinar, “Group Health Plans Quarterly Update: Q3 2021” (live on 9/29/2021).

Contributing Editors: EBIA Staff.

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