Today we received a notification from our colleague Tony Wilson, a Principal with NFP, alerting us to some recent updates to Employer Mandate affordability percentages under the Affordable Care Act. If you have any questions as to how this may affect your business, reach out to Amy Williams and let us know how we can help.
The IRS recently announced the affordability percentage under the ACA’s Employer Mandate will increase to 9.69% for 2017. As we move into Annual Enrollment this fall we will use that percentage in our calculations for your eligible employees for the 2017 plan year.
This early notice is welcome news considering the IRS’s propensity for last minute announcements.
For example, the ACA’s affordability percentage under the Employer Mandate initially was set at 9.5%. In mid-December 2015 the IRS issued a notice that stated it intended to amend the regulations under the ACA to reflect that the applicable percentage in the affordability safe harbors should be adjusted to 9.56% for plan years beginning in 2015 and 9.66% for plan years beginning in 2016.
As you can see this announcement was made as the 2015 calendar year was coming to a close and after the annual enrollment period for the 2016 plan year had ended. Because of the timing of the announcement coupled with the fact annual enrollment had closed and all information already had been communicated to eligible employees at 9.5%, my recommendation was that clients move forward into 2016 using 9.5% as the safe harbor affordability standard.
To add some perspective, an employee earning $8.00 an hour and averaging 30 hours per week would contribute an additional $0.69 per pay period (assuming 26 pay periods) at 9.66% vs. 9.5%.
I understand that at least one payroll company clients utilize recently transitioned clients to the 9.66% for 2016. My recommendation is still that clients use the 9.5% affordability safe harbor for 2016 since that is what was communicated to eligible employees during annual enrollment prior to the IRS’s announcement. Changing the safe harbor during the plan year could open several doors that would expose clients from a compliance perspective and possibly a legal perspective. We do not want any of our clients exposed in this manner.
I recommend that you confirm with your payroll company customer service representative (CSR) what affordability percentage the payroll company is using for your company for 2016. I also recommend if your payroll company moved you to the 9.66% for 2016 that you instruct them to move you back to the 9.5% for 2016 and refund any additional monies deducted from employees at the 9.66% level.