Affordability Percentages Will Decrease for 2022
Posted November 22, 2021
On Aug. 30, 2021, the IRS issued Revenue Procedure 2021-36 to index the contribution percentages in 2022 for determining affordability of an employer’s plan under the Affordable Care Act (ACA).
For plan years beginning in 2022, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:
- 9.61% of the employee’s household income for the year for purposes of both the pay or play rules and premium tax credit eligibility; and
- 8.09% of the employee’s household income for the year for purposes of an individual mandate exemption (adjusted under separate guidance). Although this penalty was reduced to zero in 2019, some individuals may need to claim an exemption for other purposes.
The updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2022. This is a significant decrease from the affordability contribution percentages for 2021, which were set at 9.83% and 8.27%. As a result, some employers may have to lower their employee contributions for 2022 to meet the adjusted percentage.
For plan years beginning in 2022, the ACA’s affordability contribution percentages are decreased significantly to:
- 9.61% under the pay or play rules
- 9.61% under the premium tax credit eligibility rules
- 8.09% under an exemption from the individual mandate
August 30, 2021
Rev. Proc. 21-36 increased the ACA’s affordability contribution percentages for 2022.
January 1, 2022
The updated percentages are effective for taxable plan years beginning Jan. 1, 2022.