2022 Federal Poverty Level Guidelines

The Department of Health and Human Services has released the federal poverty level (FPL) guidelines for 2022. The FPL guidelines were published in the Federal Register on January 21, 2022. These poverty guidelines are important for a number of reasons, not the least of which is the Affordable Care Act.

• The FPL guidelines are used to determine eligibility for premium assistance and cost-sharing.
• Further, for employer shared responsibility purposes, use of the FPL guidelines is one of three safe harbor methods that can be utilized to determine an individual’s household earnings for purposes of satisfying the ACA’s affordability standard. Coverage under an employer-sponsored plan is deemed affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.61% (indexed for 2022) of the employee's household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan. If the FPL guidelines safe harbor is used, the maximum individual contribution is $108.83 (indexed for 2022). As background, employers subject to the ACA’s employer shared responsibility provisions who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace. If an employer is using the FPL as its affordability standard, it is allowed to use the FPL guidelines in effect six months prior to beginning of the plan year. Note: a calendar year plan must use the 2021 FPL guidelines since the 2022 FPL guidelines were not issued when the offer of coverage was made.
• In addition, these FPL guidelines are used to determine eligibility for other federal entitlement programs such as the Children’s Health Insurance Program, certain parts of Medicaid, and subsidies for Medicare Part D prescription benefits.

The 2022 FPL guidelines became applicable on January 12, 2022 (unless an office administering a program using the guidelines specifies a different effective date for that particular program). Below is a chart reflecting the 2022 and 2021 levels.

4980H Penalties

Employers subject to the ACA’s employer shared responsibility mandate (employing 50 or more full time and full time equivalent employees) who fail to offer minimum essential coverage to their full time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace. 

If an employer does not know an individual’s household earnings, it can use one of three safe harbors for purposes of determining affordability:

• A Form W-2 determination in which the employer’s lowest cost self-only coverage providing minimum value does not exceed 9.61% (for 2022; 9.83% in 2021), of the employee’s Form W-2 wages (Box 1) for the calendar year.
• A rate of pay method in which the minimum value cannot exceed 9.61% (for 2022; 9.83% in 2021), of an amount equal to 130 hours, multiplied by the employee’s hourly rate of pay as of the first day of the coverage period. For salaried employees, the monthly salary is used instead of the 130 hour standard. An employer can apply this method to hourly employees if they experience a reduction in pay during the year; however, this methodology cannot be used for commissioned sales people or tipped employees.
• A Federal poverty line (FPL) standard (described above).

For 2022, the ‘no coverage’ excise tax pursuant to Code Section 4980H(a) is $2,750 annualized ($229.17 per month) and the ‘inadequate or unaffordable’ excise tax pursuant to Code Section 4980H(b) is $4,120 annualized ($343.33 per month).

2023 Out-of-Pocket Cost Sharing Limits

In its 2022 Notice of Benefit and Payment Parameters the Department of Health and Human Services (HHS) provides that going forward the out-of-pocket cost sharing limits will be announced in January for the following benefit year.  To that end, in January 2022, HHS announced the 2023 cost-sharing limits. 

These annual out of pocket limits are applicable to insured plans offered through the marketplace, and non-grandfathered insured and self-funded plans offered outside the marketplace. Below are cost sharing limits for 2022 and 2023:

Note: no individual can be subject to an out-of-pocket limit greater than the single limit.

As a reminder, the out-of-pocket limits applicable to high deductible health plans (HDHP) used in conjunction with health savings accounts (HSA) differ from these ACA-imposed cost sharing limits. Below are the OOP limits for HDHP plans for 2022:

Annual PCORI Fee and Filing

The IRS released the adjusted applicable dollar amount for the Patient Centered Outcome Research Institute (PCORI) fee.  For policy and plan years ending between October 1, 2020 and October 1, 2021, the fee is $2.66 per covered life.  The fee increases to $2.79 per covered life for policy and plan years ending between October 1, 2021 and before October 1, 2022 (applicable for a 2021 calendar year plan) according to IRS Notice 2022-4. 

As background, the PCOR fee is assessed on the average number of lives covered under the policy or plan.  Virtually, all health plans, whether insured or self-funded are subject to the PCORI fees.  With regard to reimbursement type plans, health reimbursement arrangements (HRA) and medical flexible spending account (FSA) plans are subject to these fees.  However, FSA plans that qualify as HIPAA-excepted plans are not subject to these fees.  The PCORI fee does not apply to stand alone dental or vision plans.

The PCORI fees are assessed on the insurer of an insured plan.  For a self-funded plan, the plan sponsor is required to pay the fee on behalf of its plan.  Because the law provides that the PCORI fees are to be paid by the plan sponsor, at least for plans subject to ERISA, the fees cannot be paid from plan assets.

As in prior years, the fee is required to be reported annually to the IRS on the second quarter Form 720 and paid by its due date, July 31^st (August 1, 2022 since July 31^st is a Sunday).

Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers webpage.

1095-C Filing Date Reminder

The IRS and Treasury issued proposed regulations providing that the 1095-C benefit statement provided by applicable large employers (ALEs) will be granted a permanent 30 day extension.  Generally the statement must be provided to individuals by January 31 following the year to which it applies.  These regulations change the date to March 2 or the next business day if March 2nd falls on a weekend day or legal holiday.  (See HRB 160)

Note: this does not change the dates by which the forms must be submitted to the IRS (generally February 28 for forms filed in hard copy and March 31 for electronic filings).

Reminder: State-Required Individual Mandate Reporting

As a reminder, the states of California, District of Columbia, Massachusetts, New Jersey, Rhode Island and Vermont have enacted individual mandate laws that require residents to be covered by minimum essential coverage (MEC) or pay a state tax.  Further, certain states require entities who provide MEC to file information returns to the relevant state revenue departments.  Most of these states accept the Form 1094 and 1095 series used for federal MEC filing purposes.  (See HRB 160) 

About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Kansas City office.