IRS Issues New Guidance on Individual Mandate Affordability Exemption

Guidance Covers Individuals & Families Without Access to a Bronze-Level Plan

The Internal Revenue Service has issued guidance to individuals and families seeking to claim an affordability exemption from the Affordable Care Act’s individual shared responsibility (“individual mandate”) tax penalty.

Under the Affordable Care Act, individuals are currently required to have minimum essential health coverage, qualify for an exemption from that requirement, or pay the individual mandate tax penalty. Individuals and families ineligible for coverage under a group health plan can, among other things, qualify for an exemption from the individual mandate if the lowest-priced bronze-level plan available to them on the Health Insurance Marketplace would cost more than 8.16% of their household income, accounting for any premium tax credit. This is known as the “affordability exemption.”

However, for purposes of determining their affordability exemption eligibility for tax year 2017, the IRS is advising individuals who live in rating areas where no bronze plan was offered for 2017 that they may generally use the lowest-cost metal plan available in the Marketplace serving the rating area in which the individual resides that would cover all nonexempt members of the individual’s family as the applicable plan.

Additional guidance from the IRS is available here.