On Aug. 30, 2021, the IRS issued Revenue Procedure 2021-36 to index the contribution percentages in 2022 for determining the 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:
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.
Overview of the Affordability Requirement
Under the ACA, the affordability of an employer’s plan may be assessed in the following three contexts:
Although all of these provisions involve an affordability determination, the test for determining a plan’s affordability varies for each provision.