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HHS announces 2020 federal poverty guidelines

By Maureen Gammon and Anu Gogna | February 11, 2020

Employers that use the FPL affordability safe harbor to comply with the ACA employer mandate should apply the 2020 guidelines when appropriate.
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The Department of Health and Human Services (HHS) recently announced the 2020 federal poverty guidelines (also referred to as federal poverty levels or lines [FPLs]). Employers that use the FPL affordability safe harbor to comply with the Affordable Care Act (ACA) employer shared responsibility mandate should start applying the 2020 guidelines when appropriate. (Employers may use the FPL guidelines in effect six months before the first day of the plan year.)

These guidelines are published annually and used by several federal agencies in determining eligibility for federal assistance programs, including Medicare, Medicaid and the Children’s Health Insurance Program.

Under the ACA, the FPLs are used to determine eligibility for premium tax credits or cost-sharing reduction subsidies and to calculate the employee’s required contribution threshold under the FPL affordability safe harbor for the employer shared responsibility mandate.

Background

An employer with 50 or more full-time employees, including full-time employee equivalents — i.e., an applicable large employer, or ALE — must offer minimum essential health coverage that is affordable and provides minimum value to full-time employees and their eligible dependents.

To meet the affordability requirement, the employee contribution for the lowest-cost health benefit option must not exceed 9.78% (for 2020) of the employee’s household income. Rather than requiring employers to calculate each full-time employee’s household income for the year, the IRS allows the use of three affordability safe harbors: Form W-2, rate of pay and FPL.

FPL affordability safe harbor

For purposes of the FPL affordability safe harbor, the FPL is determined by the state in which the employee is employed. The 2020 FPLs for the continental U.S. (48 contiguous states and the District of Columbia), Alaska and Hawaii are as follows:

  • Continental U.S.: $12,760 (up from $12,490 in 2019)
  • Alaska: $15,950 (up from $15,600 in 2019)
  • Hawaii: $14,680 (up from $14,380 in 2019)

For 2020, the FPL safe harbor is determined by multiplying 9.78% by the applicable FPL threshold and dividing that product by 12. The result is the monthly limit on the employee-only required contribution for the ALE’s lowest-cost health coverage option that meets minimum value.

Authors

Senior Regulatory Advisor, Health and Benefits

Senior Regulatory Advisor, Health and Benefits

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