The Internal Revenue Service (IRS) has released Rev. Proc. 2020-36, which contains the inflation adjusted amounts for 2021 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2021, the affordability percentage for employer mandate purposes is indexed to 9.83%.  Employer shared responsibility payments are also indexed.

Code Section 4980H(a) 4980H(b) 36B(b)(3)(A)(i)
Description Coverage not offered to 95% (or all but 5) of full-time employees. Coverage offered, but unaffordable or is not minimum value. Premium credits and affordability safe harbors.
2021* $2,700 $4,060 9.83%
2020 $2,570 $3,860 9.78%
2019 $2,500 $3,750 9.86%
2018 $2,320 $3,480 9.56%
2017 $2,260 $3,390 9.69%
2016 $2,160 $3,240 9.66%
2015 $2,080 $3,120 9.56%
2014** $2,000 $3,000 9.50%

*Section 4980H(a) and (b) penalties 2021 are projected.

**No employer shared responsibility penalties were assessed for 2014.

Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year. Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.83% of the employee’s household income in 2021 (prior years shown above). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level.

If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved […]