ACA Affordability Percentage Decreases to 9.78% for 2020

The IRS released its annual inflation adjustment to the percentage of household income used to determine whether an employer's offer of health care coverage under the Affordable Care Act (ACA) is affordable [Rev. Proc. 2019-29].

For plan years beginning in 2020, the percentage of household income decreases to 9.78%. The household income percentage for plans beginning in 2018 was 9.56%, and for plans starting in 2019, it is 9.86%.

Household Income and Affordability

The ACA's employer mandate requires applicable large employers to offer minimum essential coverage that provides minimum value and is affordable to their full-time employees. Affordability is determined as a certain percentage of an employee's household income. Using the adjusted percentage for 2020, if the required employee premium contribution does not exceed 9.78% of the employee's household income, then the coverage is affordable under the ACA.

Employer Shared Responsibility (ESR) Payments for 2020

The premium adjustment percentage for 2020, which is used to calculate several inflation-adjusted amounts under the ACA, including the ESR payment amounts, has been announced [84 F.R. 17454]. The ESR payment amounts were set at $2,000 and $3,000 under the law but are adjusted annually for inflation. The ESR payment amounts for 2020 are $2,570 and $3,860 ($2,500 and $3,750 for 2019).