2020 Employer Affordability Safe Harbor

September 19, 2019

Compliance

Employer Mandate: Part 3 Sneak Peak

We will do a deep dive into what kind of medical coverage must be offered to avoid potential employer mandate penalties in Part 3 of our Affordable Care Act (ACA) Employer Mandate series. On July 23, 2019, the IRS released Revenue Procedure 2019-29, updating the ALEM’s required contribution percentage for affordability for plan years beginning on January 1, 2020 through plan years beginning on December 1, 2020.

Plan year beginning on or after Section 4980H(a) Annual Penalty Section 4980H(b) Annual Penalty Employer Affordability Safe Harbor
January 1, 2019 $2,500 $3,750 9.86 %
January 1, 2020 $2,580 (projected) $3,870 (projected) 9.78 %

Impact of Updates
For applicable large employers (as defined by the ACA) planning their 2020 contribution strategy, the affordability percentage is declining to 9.78% from 2019’s indexed value of 9.86%.   This means employers will be responsible for more of the employee-only premium for the 2020 plan year if pursuing a strategy to minimize potential employer mandate penalties.

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About Allie Waits

Allie is an attorney and works as a compliance consultant for J.W. Terrill. She provides research and guidance on various issues impacting clients’ employee benefits plans. Allie graduated from Saint Louis University in 2016 with her J.D., and a Master’s of Health Administration.

View all posts by Allie Waits

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