2022 ACA Penalties and Parameters

August 30, 2021, the Internal Revenue Service released Revenue Procedure 2021-36 to index the contribution percentages in 2022 to determine whether an employer's plan is affordable under the Affordable Care Act (ACA). With the IRS actively assessing potential penalties, it is critical to watch the changing parameters around ACA regulations. Employers should keep ACA requirements and regulations for 2022 in mind as they are amid the 2021 reporting season. 

For 2022, employers must continue to:

• Provide affordable coverage that provides minimum value to 95% of full-time employees for each calendar month of the year. 

• Complete and file IRS Forms 1094 and 1095 accurately, and provide employees with information (Form 1095) in a timely manner. 

• Enforce compliance with the employer mandate by managing employee eligibility.

Notes for Controlled Groups (i.e., companies with multiple common ownership or parent-subsidiary relationships): All companies in a controlled group are considered single employers for ACA reporting. This applies to many employee benefits laws, such as anti-discrimination and the ACA. Having employer shared responsibility rules discourages employers from setting up multiple companies. Keeping all entities in the group in compliance is imperative to avoid penalties. 

Key ACA Parameters and Penalties for 2022

The employee's required contribution for self-only coverage will be considered affordable for plan years beginning in 2022 if:

Things you should pay attention to

The IRS continues to assess potential penalties for previous reporting years. IRS penalties are attributed to failure to file, late filing, inaccurate filing, and failure to meet the 95% threshold for full-time employees who don't receive affordable coverage. Letter 226-J, distributed by the IRS, has included reporting assessments for individual companies in the millions and premium tax subsidies paid to full-time employees who did not receive an affordable offer of coverage that meets minimum value. 

As indicated in the chart above, this year, the IRS requirements are more stringent regarding what is considered affordable. The Internal Revenue Service (IRS) issued Revenue Procedure 2021-36 on August 30, 2021 decreasing the affordability percentage index from 9.83% in 2021 to 9.61% for plan years beginning in calendar year 2022. This means coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.61% percent  (vs. 9.83% in 2021) of the employee’s household income. This means employers may need to reduce the pricing of their lowest cost minimum value plan in order to continue to meet affordability guidelines.

With these higher stakes it’s critical that your organization is maintaining compliance with ACA regulations. It’s also important that your c-suite understands these risks. By having c-suite support it can help HR lay out  initiatives to remain compliant. Check out these strategies to help have these important conversations, plus an infographic to help relay this key information.