The IRS recently updated their indexing adjustments for certain provisions under IRC Section 36B in Revenue Procedure 2020-36. There are two important updates:
The IRS announced the 2021 shared-responsibility affordability percentage RP 2020-36. The affordability percentage increased from 9.78% for 2020 plan years to 9.83% for 2021 plan years. Employees’ maximum contribution percentage is adjusted annually by considering the ratio of premium growth to income growth in the preceding calendar year.
Employers should not overlook the annual inflation-adjusted shift in cost-sharing limits for group health plan coverage, as they could face steep penalties for failing to provide affordable coverage under the ACA’s shared-responsibility provisions.
Employers now have the information to evaluate the affordability of their plans for 2021. For some employers, an increase in the affordability percentage will mean that they will have the flexibility to increase what employees pay for employee-only coverage if they want their plans to be affordable in 2021.
Next, the initial and final premium percentages listed in the “Applicable Percentage” Table in Internal Revenue Code Section 36B(b)(3)(A)(i) were adjusted for the 2021 calendar year.This table provides a sliding scale range of percentages within an applicable tier of household income to calculate an individual’s premium tax credit when purchasing coverage through an ACA Health Exchange. Here’s a link to the new percentages: Revenue Procedure 2020-36
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