IRS Lowers Affordability Percentage for 2022

Affordability Percentage 2022

IRS Lowers Affordability Percentage for 2022

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. Coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.61% percent of the employee’s household income.

This percentage is important when setting employer contributions for self-only coverage for plans beginning on or after January 1, 2022. Health e(fx) clients can use the affordability tests when making contribution and plan decisions.

Example using the hourly Rate of Pay affordability safe harbor:
To determine the self-only contribution premium for hourly employees, multiply the hourly rate of pay at the beginning of the coverage period for each employee by 130 hours. That result, multiplied by the 2022 affordability percentage of 9.61%, will provide you with the self-only contribution maximum for the employee under the Rate of Pay affordability safe harbor.

Maximum monthly contributions for John Smith earning $10 per hour, plan year beginning January 1, 2021 and January 1, 2022:

  • 2021: $10 an hour x 130 hours = $1300 X 9.83% = $127.79 maximum monthly contribution, effective for the plan year that begins between January 1, 2021 – December 31, 2021
  • 2022: $10 an hour x 130 hours = $1300 X 9.61% = $124.93 maximum monthly contribution, effective for the plan year that begins between January 1, 2022 – December 31, 2022

Example using Federal Poverty Line safe harbor:
Under the Federal Poverty Line (FPL) affordability safe harbor in 2022, an employee’s premium payment can’t exceed $103.15 per month, down from $104.53 per month in 2021.

For example, a calendar year plan in 2021 meets the FPL safe harbor* with a premium of $104.53, which is 9.83% of the applicable FPL of $12,760. For calendar year plans to satisfy the FPL safe harbor in 2022, monthly premiums cannot exceed $103.15, which is 9.61% of the applicable FPL of $12,880.

Example using W2 safe harbor:
The W2 safe harbor can be the trickiest safe harbor to use because it cannot be determined until the end of the year. The reason for this is because you need the amount in the W2 Box 1 for the affordability calculation. In order to claim the W2 safe harbor, the following formula is generally used: W2 Box 1 Wages multiplied by 9.61% with an adjustment for partial year coverage.

For example, one of your employees make $45,000 a year, however they have only worked at the company for nine months but has been offered coverage since their first day. To determine affordability for a plan year that begins in 2022, an employer would need to take $45,000 and multiply it by 9.61%. Then multiply the result by 9/12. The maximum annual amount that you can require your employee to pay for self-only coverage is $3,243.38 in order to meet the W2 safe harbor for the nine months the employee has been covered.

Keeping up to date with changing requirements can be tough. We’re here to help. Health e(fx) continues to invest in our solutions to help our systems stay current with new laws and requirements. If you have questions about healthcare coverage affordability, contact your Health e(fx) Account Manager or email us at

*For states other than Alaska and Hawaii due to their higher FPL thresholds.