Recently the IRS updated the affordability percentage to 9.61% for plan years that start on or after Jan 1, 2022. This percentage is used by applicable large employers (ALEs) to determine whether or not the employer’s coverage is considered affordable for that employee.
There are 3 affordability safe harbors an employer can use to determine whether or not coverage is “affordable” for a certain employee. The 3 safe harbor methods include:
1. Rate of Pay
3. Federal Poverty Level
Because the affordability safe harbor used will reflect which codes are entered on Lines 14 and 16 of each employee’s Form 1095-C, employers will need to calculate affordability using the adjusted percentage for 2022 plan years.