Monday, April 2, 2018
The IRS has updated its online Patient Protection and Affordable Care Act (ACA) question and answer resource to reflect updated penalty amounts, affordability thresholds, and guidance on expired transition relief applicable to employers in 2018.
Large employers that fail to offer adequate and affordable coverage to substantially all full-time employees may be assessed a potential penalty called an “Employer Shared Responsibility Payment” (ESRP). Each year, these penalty amounts adjust for inflation. The updated Q&As now reflect this increase to the per-employee dollar amounts. The section 4980H(a) penalty for failure to offer coverage to substantially all full-time employees increased from its base of $2,000 to $2,320 per employee. The section 4980H(b) penalty for failure to offer coverage that meets the ACA’s adequacy and affordability standards increased from its base of $3,000 to $3,480 per employee. The penalties apply when a full-time employee qualifies for and receives financial help to purchase coverage in State-based or Federal Facilitated Exchange (Marketplace) if employer-sponsored coverage either was not offered or was inadequate or unaffordable.
Coverage is affordable under the ACA so long as the contribution required from the employee for self-only coverage under the lowest-cost plan that meets the ACA’s adequacy standards does not exceed 9.5 percent of a full-time employee’s gross household income. This 9.5 percent affordability threshold is adjusted annually each year by the IRS. The Q&As now reflect that, for plan years beginning in 2018, the threshold is 9.56 percent (down from 9.69 percent in 2017).
The Q&As have also been updated to reflect the fact that 2015 and 2016 transition relief for certain Employer Shared Responsibility Requirements available on the basis of workforce size and non-calendar plan year dates has expired and is no longer available to employers.