The IRS recently released Revenue Procedure 2014-37. This pronouncement adjusts a number of provisions of the Affordable Care Act which are required to be indexed.
The Applicable Percentage Table which is used to calculate an individual’s premium tax credit was adjusted as follows:
|Household income percentage of Federal poverty line:||Initial percentage||Final percentage|
|Less than 133%||2.01%||2.01%|
|At least 133% but less than 150%||3.02%||4.02%|
|At least 150% but less than 200%||4.02%||6.34%|
|At least 200% but less than 250%||6.34%||8.10%|
|At least 250% but less than 300%||8.10%||9.56%|
|At least 300% but not more than 400%||9.56%||9.56%|
If the household income is less than 400% of the Federal poverty line, the family qualifies for a federal premium tax credit. It is important to note that the premiums are normally estimated and rebated by the insurance carrier, but are subject to a final adjustment on the household’s tax return.
The Rev Proc also altered the required contribution percentage used to determine whether the employer’s health insurance premium charged to the employee is affordable. If the amount paid by the employee exceeds 9.56% of the employee’s income, then the plan for that employee is not considered affordable. The percentage used to define affordable for the individual mandate is 8.05% in 2015.
The affordability provisions require that in 2015, employers with greater than 100 employees offer affordable or minimum value coverage or be subject to a monthly penalty of $250 per employee. The penalty applies to those employees who obtain health coverage on the exchanges and receive a premium credit or cost-sharing reduction.
These changes are required by the Act. The IRS must adjust the affordability percentage by the excess of the rate of premium growth over the rate of income growth.
Employers should consult with their medical insurance advisors and plan coordinators to ensure that their employee levels contributions in 2015 consider these changes.