2021 Employer Affordability Safe Harbor

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Compliance Consultant
+1 314 594 2624
July 29, 2020

IRS Announces Small Increase in Affordability Percentage

On July 21, 2020, the Internal Revenue Service (IRS) issued Revenue Procedure 2020-36, which included the Affordable Care Act employer shared responsibility mandate affordability safe harbor percentage for 2021.[1]

The affordability percentage was originally set at 9.5%. This safe harbor percentage is adjusted each year based on the growth of health insurance premium rates relative to the national consumer price index. The 2020 and 2021 affordability safe harbor percentages and employer shared responsibility mandate penalties are below. The official 2021 penalties are not available yet.

Plan year

beginning on

or after

Section

4980H(a)

Penalty

Section

4980H(b)

Penalty

Affordability

Safe Harbor

 January 1, 2020

$214.17/month

$2,570/year

$321.67/month

$3,860/year

 9.78 %

 

 January 1, 2021

$225.00/month

$2,700/year (projected)

$338.33/month

$4,060/year (projected)

9.83 %

Federal Poverty Line Safe Harbor

The 2021 Federal Poverty Line (FPL) amounts are not available,[2] but plans can use the FPL amount in effect six months prior to the start of the plan year. Based on the 2020 mainland single FPL amount of $12,760, an employer with a plan year beginning before July 1, 2021 can charge up to $104.53 per month for single coverage and satisfy the FPL safe harbor for 2021. 


1 Revenue Procedure 2020-36 also addresses the affordability percentages used to determine an individual’s 2021 eligibility for subsidized coverage in the Public Health Insurance Marketplace.

2 The FPL amounts usually do not appear until the 1st quarter of the applicable calendar year.