To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2021. Employers should review their plan documents to confirm that they include these required changes.
ACA Affordability Standard
Under the ACA’s employer shared responsibility rules, applicable large employers (ALEs) are required to offer affordable, minimum value health coverage to their full-time employees (and dependent children) or risk paying a penalty. These employer shared responsibility requirements are also known as the “employer mandate” or “pay or play” rules.
Under the ACA, an ALE’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5% of the employee’s household income for the taxable year (as adjusted each year). The adjusted percentage is 9.78% for 2020.
For plan years that begin on or after Jan. 1, 2021, the affordability percentage is 9.83%.
This means that employer-sponsored coverage for the 2021 plan year will be considered affordable under the employer shared responsibility rules if the employee’s required contribution for self-only coverage does not exceed 9.83% of the employee’s household income for the tax year.
Non-grandfathered health plans are subject to limits on cost sharing for essential health benefits (EHB). The annual limit on total enrollee cost sharing for EHB for plan years beginning on or after Jan. 1, 2021, is $8,550 for self-only coverage and $17,100 for family coverage.
HDHP and HSA Limits for 2021
If you offer an HDHP to your employees that is compatible with an HSA, you should confirm that the HDHP’s minimum deductible and out-of-pocket maximum comply with the 2021 limits. The IRS limits for HSA contributions and HDHP maximum out-of-pocket limit increase for 2021. The HSA contribution limits will increase effective Jan. 1, 2021, while the HDHP out-of-pocket limit will increase effective for plan years beginning on or after Jan. 1, 2021.
The following table contains the HDHP and HSA limits for 2021 as compared to 2020. It also includes the catch-up contribution limit that applies to HSA-eligible individuals who are age 55 or older, which is not adjusted for inflation and stays the same from year to year.
Additional HRA Design Options
Employers have two additional health reimbursement arrangement (HRA) design options for plan years that begin on or after Jan. 1, 2020—an individual coverage HRA (ICHRA) and an excepted benefit HRA (EBHRA).
If you have any questions or concerns, the Cypress Benefit Solutions team more than happy to help!