The IRS recently announced the 2018 contribution percentages used to determine whether the coverage offered by an employer is affordable. Premium tax credit eligibility, and potential employer penalties, hinge on whether or not employer coverage is affordable.
For 2018, the premium tax credit affordability threshold will be 9.56 percent of household income. This percentage also applies to the employer shared responsibility safe harbors. This means that for 2018, employer-sponsored coverage will be deemed affordable if the required employee contribution for the lowest cost self-only coverage does not exceed 9.56 percent of the safe harbor amount. This is a decrease from the 2017 threshold of 9.69 percent.
For employers relying on the Federal Poverty Level (FPL) safe harbor, the following chart illustrates the impact this reduction has on the maximum permissible employee monthly contribution:
| Calendar Year |
Prior Year FPL |
Affordability % |
Maximum Monthly Contribution |
| 2018 |
$12,060 |
9.56 |
$96.08 |
| 2017 |
$11,880 |
9.69 |
$95.93 |
| 2016 |
$11,770 |
9.66 |
$94.75 |
But with all of the talk of “repeal and replace,” who cares? Brokers and employers who remain focused on strategy.
While the industry anxiously waits to see what changes may be in store for health care reform, the ACA remains the law of the land. For many, pay or play decisions regarding ACA compliance has long been about strategy. While the change is relatively small for 2018 from 2017, employers that have not revisited their contribution strategy for a couple years may be able to increase the required employee contribution and still use a safe harbor. Brokers must continue to be a resource for strategic planning during unpredictable times.
For more information, contact us today.
the Centers for Medicare & Medicaid Services (CMS) for an informational webinar regarding the