New IRS guidance clarifies certain aspects of the Affordable Care Act’s “pay or play” provisions related to determining affordability of employer-provided coverage and calculating penalty amounts for calendar years 2015 and 2016.

Adjusted Affordability Threshold Under the new guidance, the 9.5% threshold for determining whether employer-provided health coverage is affordable for purposes of “pay or play” (including for use of the affordability safe harbors) is adjusted to 9.56% for plan years beginning in 2015, and 9.66% for plan years beginning in 2016. Coverage will be considered affordable if the portion of the annual premium an employee must pay for self-only coverage does not exceed the applicable percentage of his or her household income.

The guidance also addresses how certain HRA contributions, flex credits, or opt-out payments are taken into account for purposes of determining whether an employer has made an offer of affordable minimum value coverage under an eligible employer-sponsored plan.

Adjusted Penalty Amounts In addition, the new guidance confirms that for calendar year 2015, the adjusted $2,000 dollar amount used to calculate the penalty (for employers not offering coverage) is $2,080, and the adjusted $3,000 dollar amount (for employers offering coverage that is not affordable or does not provide minimum value) is $3,120. For calendar year 2016, the adjusted $2,000 dollar amount is $2,160, and the adjusted $3,000 dollar amount is $3,240.   Our Pay or Play Affordability and Penalty Calculators (found within the Client Resource Center HR Library) can help employers determine their potential liability.