Seyfarth Synopsis: The IRS has announced adjustments decreasing the affordability threshold and increasing employer shared responsibility payments for plan years beginning in 2022.
On May 9, 2022, the IRS updated the Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act page on the IRS website to include 2022 indexing adjustments for the affordability threshold and employer shared responsibility payments.
Affordability
Under the ACA, applicable large employers (ALEs) that do not offer affordable minimum essential coverage to at least 95% of their full-time employees (and their dependents) under an eligible employer-sponsored plan may be subject to an employer shared responsibility penalty. The IRS determines whether health insurance coverage is affordable using an affordability threshold that is indexed and adjusted each year.
For plan years beginning in 2022, coverage is considered affordable if an employee's required contribution for self-only coverage does not exceed 9.61% of the employee's household income. This is a decrease of 0.22% from the 2021 affordability threshold of 9.83%.
Penalty Amounts
Employer shared responsibility penalties (which are calculated monthly) are indexed and adjusted each year. The IRS will assess an ALE with an employer shared responsibility penalty under IRC Section 4980H:
- Subsection (a) – if the ALE fails to offer at least 95% of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, and at least one full-time employee is allowed a premium tax credit.
The (a) penalty is determined by multiplying the total number of full-time employees (minus 30) by the penalty amount. For plan years beginning in 2022, the (a) penalty amount is $2,750, or $229.17 per month.
- Subsection (b) – if the ALE does offer coverage to at least 95% of its full-time employees, but the coverage is not affordable and at least one full-time employee receives a premium tax credit.
The (b) penalty is determined by multiplying the number of full-time employees who receive a premium tax credit for any month by the penalty amount. For plan years beginning in 2022, the (b) penalty amount is $4,120, or $343.33 per month.
The increases in the Employer shared responsibility penalties are summarized in the chart below:
| 4980H Employer Shared Responsibility Penalties | 2021 | 2022 | Change |
| 4980H(a) Employer Shared Responsibility Penalties | $2,700 ($225.00 per month) | $2,750 ($229.17 per month) | +$50 |
| 4980H(b) Employer Shared Responsibility Penalties | $4,060 ($338.33 per month) | $4,120 ($343.33 per month) | +$60 |
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