Do Not Overlook 2018 Change in Affordability Safe Harbor Percentage
February 28, 2018
The Affordable Care Act (ACA) has many moving parts, and not to be overlooked is the annual inflation-adjusted shift in what constitutes "affordable" health care coverage.
The Internal Revenue Service (IRS) has announced the 2018 shared-responsibility affordability percentage. For plan years beginning in 2018, employer-sponsored coverage will be considered affordable if an employee's required contribution for self-only coverage for the least-expensive plan option that meets ACA requirementsdoes not exceed 9.56 percent of the employee's household income for the year (down from 9.69 percent in 2017).
Since employers don't know their employees' household incomes, the ACA created a safe harbor in which any of the following can be used in lieu of household income:
- The employee's W-2 wages—as reported in Box 1—generally as of the first day of the plan year,
- The employee's rate of pay—hourly wage rate x 130 hours, as of the first day of the plan year, or
- The individual Federal Poverty Level (FPL).
