At the end of last month, HHS released its poverty guidelines for 2018, which applicable large employers (ALEs) may use in determining whether they satisfy the Federal Poverty Line (FPL) affordability safe harbor. As background, the FPL affordability safe harbor is one of the three methods ALEs may rely upon in setting employee contribution levels for health insurance coverage to avoid employer shared responsibility penalty exposure under Code § 4980H(b).
The 2018 individual FPL is $12,140. Using the indexed employee required contribution percentage for 2018 of 9.56%, then an ALE will satisfy the FPL safe harbor if the monthly employee required contribution in 2018 does not exceed $96.72. Additionally, keep in mind that because the poverty guidelines are not released until the end of January, ALEs may rely on the FPL in effect six months prior to the beginning of their plan year.
Given that the IRS is finally enforcing employer shared responsibility penalties against ALEs through its Letter 226J, it is vital for ALEs to understand the requirements for complying with the employer shared responsibility regulations and the potential risks of noncompliance. If you have additional questions regarding how ALEs comply with one of the affordability safe harbors or other employer shared responsibility requirements, please reach out to an ETC representative. We would love to have the opportunity to earn your business.