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On July 23, 2019, the IRS issued Revenue Procedure 2019-29 to index the contribution percentages in 2020 for determining affordability of an employer’s plan under the Affordable Care Act (ACA). For plan years beginning in 2020, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:

  • 78% of the employee’s household income for the year, for purposes of both the pay or play rules and premium tax credit eligibility; and
  • 24% of the employee’s household income for the year, for purposes of an individual mandate exemption (adjusted under separate guidance). Although this penalty was reduced to zero in 2019, some individuals may need to claim an exemption for other purposes.


The Affordability Requirement

Under the ACA, the affordability of an employer’s plan may be assessed in the following three contexts:

  • The employer shared responsibility penalty for applicable large employers (also known as the pay or play rules or employer mandate);
  • An exemption from the individual mandate tax penalty for individuals who fail to obtain health coverage; and
  • The premium tax credit for low-income individuals to purchase health coverage through an Exchange.

Although all of these provisions involve an affordability determination, the test for determining a plan’s affordability varies for each provision.

The IRS previously adjusted the affordability contribution percentage for 2015 in Rev. Proc. 14-37, for 2016 in Rev. Proc. 14-62, for 2017 in Rev. Proc. 16-24, for 2018 in Rev. Proc. 17-36 and for 2019 in Rev. Proc. 18-34. The adjusted affordability contribution percentage for purposes of the individual mandate exemption is separately announced in the Notice of Benefit and Payment Parameters final rule for each year.


Affordability Adjustments

This chart illustrates the adjusted affordability percentages for each purpose since 2014. Each provision is described in more detail following the chart.



The updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2020. This is a decrease from the affordability contribution percentages for 2019. As a result, some employers may have to lower their employee contributions for 2020 to meet the adjusted percentage.


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