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IRS Announces ACA Indexing Adjustments for Affordability and Premium Tax Credit Determinations for 2019



Rev. Proc. 2018-34 (May 21, 2018)

The IRS has announced 2019 indexing adjustments for two key percentages under the Affordable Care Act (ACA). The first percentage, which is the required contribution percentage used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility under Code § 4980H, has increased from the 9.5% baseline to 9.86% for 2019. (This is an increase from 9.56% for 2018—see our Checkpoint article.). The second percentage, used to determine the amount of household income that individuals eligible for premium tax credits must contribute toward the cost of Exchange coverage, will also see small increases. The adjusted percentage, ranging from 2.08% to 9.86%, varies across household income bands.

EBIA Comment: Unlike last year’s announcement, there is no reference this year to the required contribution percentage used to determine whether individuals are exempt from the individual shared responsibility (individual mandate) penalty. This is because, effective in 2019, the penalty associated with the individual mandate will be eliminated (see our Checkpoint article). Adjustments to the affordability percentage will be of interest to applicable large employers and their advisors, since failure to offer affordable, minimum value coverage to full-time employees may result in employer shared responsibility penalties. The Code § 4980H penalty amounts are also indexed, but the indexed amounts have not yet been released for 2019. For more information, see EBIA’s Health Care Reform manual at Sections XXI.B.4 (“Individuals and Employers Eligible for the Exchange: Individual Eligibility Determinations”) and XXVIII.E (“Assessable Payment (Penalty Tax) When Inadequate Coverage Offered to Full-Time Employees and Dependents (the ‘Subsection (b) Penalty’)”).

Contributing Editors: EBIA Staff.

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