Employee Benefits Compliance

2020 Benefits Limits & New Affordability Methodology

HSA tax benefits

This article was originally published April 18, 2019, but has been updated with additional info released from the IRS on May 29, 2019 and July 29, 2019.

On April 18, 2019, the Department of Health & Human Services (HHS) released in an unpublished Notice of Benefits & Parameters for 2020. This Notice includes inflation-adjusted benefits limits & amounts, reflected in the table below. Additionally, the methodology for determining affordability has also been changed and is discussed at the end of this article.

Update May 29, 2019. The IRS released 2020 limits for HSAs and HDHPs, effective calendar years. The table below has been updated with this information – and includes other previously released 2020 benefits limits and amounts:

Type of Limit

Tier

2018

2019

2020

HSA Contribution Limit Self-only $3,450 $3,500 $3,550
Family $6,900 $ 7,000 $7,100
HDHP Minimum Deductible Self-only $1,350 $1,350 $1,400
Family $2,700 $2,700 $2,800
HDHP Maximum Out-of-pocket Expense Limit (MOOP) *** Self-only $6,650 $6,750 $6,900
Family $13,300 $13,500 $13,800
Non-HDHP Maximum Out-of-pocket Expense Limit (MOOP) *** Self-only $7,350 $7,900 $8,150
Family $14,700 $15,800 $16,300
Health FSA maximum employee pre-tax salary reduction contribution Self-only or Family $2,650 $2,700 Not released yet
Employer Mandate Penalty A Penalty- Fail to Offer $2,500 per FT EE $2,590 per FT EE
B Penalty – Unaffordable $3,750  for each EE receiving subsidy $3,890 for each EE receiving subsidy

Changes to How ACA Affordability Percentages Calculated to Result in Increased Employer Share

Although the IRS has yet to release the 2020 affordability provisions, HHS has revised how these calculations will be made. Using the new methodology, we will see a 29% increase in this percentage between 2014 and 2019 – how long we’ve used such calculations in determining whether the employer plan is affordable. This means, the 2020 affordability percentage may be significantly higher – meaning the employee contribution must be lower in order to be deemed affordable.

Update July 29, 2019. The Internal Revenue Service (IRS) released Revenue Procedure 2019-29 setting forth the 2020 affordability percentage used in determining affordability of the employer plan and for purposes of premium tax credits in the Exchange Marketplace. As the Leavitt Group news article previously mentioned, the methodology for determining affordability percentages was changed – as noted in the prior Leavitt article we should expect this decrease in affordability percentage and requiring of a higher contribution from employers subject to the ACA Employer Shared Responsibility mandate.
Dropping to 9.78% from 9.86%, employers should plan ahead to adjust their premium contributions in 2020.

Applicable Percentage Table for 2020

Household income percentage of Federal poverty line: Initial percentage Final percentage
Less than 133% 2.06% 2.06%
At least 133% but less than 150% 3.09% 4.12%
At least 150% but less than 200% 4.12% 6.49%
At least 200% but less than 250% 6.49% 8.29%
At least 250% but less than 300% 8.29% 9.78%
At least 300% but not more than 400% 9.78% 9.78%

Additional Regulatory / HHS Guidance Resources

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