IRS Publishes the ACA’s Affordability Percentage and Individual’s Premium Tax Credit Table for 2021

July 21, 2020

On July 21, 2020, the IRS published Rev. Proc. 2020-36, which provides the 2021 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2020.

As background, the ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS' required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through affordable insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.

For 2021, the ACA's affordability percentage will increase to 9.83% (up from 9.78% in 2020). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.83% of the federal poverty line or of an employee's W2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).

The 2021 PTC table used to determine an individual's eligibility for PTCs is provided below:

Household Income Percentage of Federal Poverty Line

Initial Percentage

Final Percentage

Less than 133%

2.07%

2.07%

At least 133%, but less than 150%

3.10%

4.14%

At least 150%, but less than 200%

4.14%

6.52%

At least 200%, but less than 250%

6.52%

8.33%

At least 250%, but less than 300%

8.33%

9.83%

At least 300%, but not more than 400%

9.83%

9.83%


The revenue procedure is effective for plan years beginning on and after December 31, 2020.

Employers should be mindful of the upcoming 2021 affordability percentages and make sure that the premium offerings for 2021 continue to be affordable for full-time employees, so as to avoid any employer-shared responsibility penalties. The penalties related to employer shared responsibility remain the law (despite the fact that the ACA's individual mandate was repealed in 2019).

Revenue Procedure 2020-36 »