While non-ALEs who offer group health coverage may have small group carrier requirements about affordability for their employees, these non-ALE employers are not subject to the Section 4980H affordability requirements and cannot be held liable for any employer shared responsibility penalties. Now that the IRS is actively enforcing the employer shared responsibility penalties against ALEs, understanding these affordability requirements is critical for ALEs to avoiding exposure to Section 4980H(b) penalties.
Generally, ALEs will be subject to these Section 4980H(b) penalties when they offer coverage to at least 95% of their full-time employees, but one of these full-time employees receives an unaffordable offer of coverage (or an offer of coverage that does not provide minimum value) and enrolls in subsidized Marketplace coverage. For each month in 2018 this occurs, the ALE would be subject to a monthly Section 4980H(b) penalty of $290. Depending on the number of full-time employees enrolling in subsidized Marketplace coverage and receiving an unaffordable offer of coverage, this Section 4980H(b) penalty can add up quickly.
So, how do ALEs determine when coverage is “affordable” to avoid this penalty exposure? In general, coverage is affordable if the employee’s required contribution for employee-only coverage under the least expensive plan providing minimum value does not exceed an indexed 9.5% of the employee’s household income (9.56% in 2018, 9.86% in 2019). Because ALEs do not typically know their employees’ household incomes, IRS regulations provide the following affordability safe harbors that ALEs may use:
- W-2 safe harbor: If the employee’s contribution for single coverage under the employer’s lowest cost medical option does not exceed an indexed 9.5% of the employee’s Box 1, W-2 pay (taxable wages) for the current year, the affordability test is satisfied. This method may be more useful when the employees work overtime or hours over 130 in a month.
- Rate of pay safe harbor: If the employee’s contribution for single coverage under the lowest cost medical option offered by the employer does not exceed an indexed 9.5% of the employee’s lowest hourly wage in a month X130, the affordability test is satisfied. This method disregards actual hours worked and assumes hourly rate x 130. Overtime rate of pay is also ignored. Please note, however, that this method of calculation cannot be used for tipped or commission-based employees.
- Federal poverty line safe harbor:If the employee’s contribution for single coverage under the employer’s lowest cost medical option does not exceed an indexed 9.5% of the federal poverty level for a single individual, the affordability test is satisfied. The federal poverty guidelines are generally updated each year. The current levels can be found here: https://aspe.hhs.gov/poverty-guidelines
We hope this tip sheet helps provide a general overview of the Section 4980H affordability requirements. For your convenience, we are also attaching an ROP cheat sheet for both 2018 and 2019. If you have any questions or need further assistance, please contact ETC and we will be happy to help.
Content produced by our partners ETC (Eligibility Tracking Calculators). For more information on other ACA & HR Compliance topics, speak to a benefit consultant today.
Affordability Chart for 2018 Plan Year
|
Affordability for 2019 Plan Year –
|
|||||||
| wage / hour | monthly hrs | monthly wage | 9.56% threshold | wage / hour | monthly hours | monthly wage | 9.86% threshold | |
| $7.25 | 130 | $942.50 | $90.10 | $7.25 | 130 | $942.50 | $92.93 | |
| $7.35 | 130 | $955.50 | $91.35 | $7.35 | 130 | $955.50 | $94.21 | |
| $7.50 | 130 | $975.00 | $93.21 | $7.50 | 130 | $975.00 | $96.14 | |
| $8.00 | 130 | $1,040.00 | $99.42 | $8.00 | 130 | $1,040.00 | $102.54 | |
| $8.25 | 130 | $1,072.50 | $102.53 | $8.25 | 130 | $1,072.50 | $105.75 | |
| $8.50 | 130 | $1,105.00 | $105.64 | $8.50 | 130 | $1,105.00 | $108.95 | |
| $8.75 | 130 | $1,137.50 | $108.75 | $8.75 | 130 | $1,137.50 | $112.16 | |
| $9.00 | 130 | $1,170.00 | $111.85 | $9.00 | 130 | $1,170.00 | $115.36 | |
| $9.25 | 130 | $1,202.50 | $114.96 | $9.25 | 130 | $1,202.50 | $118.57 | |
| $9.50 | 130 | $1,235.00 | $118.07 | $9.50 | 130 | $1,235.00 | $121.77 | |
| $9.75 | 130 | $1,267.50 | $121.17 | $9.75 | 130 | $1,267.50 | $124.98 | |
| $10.00 | 130 | $1,300.00 | $124.28 | $10.00 | 130 | $1,300.00 | $128.18 | |
| $10.25 | 130 | $1,332.50 | $127.39 | $10.25 | 130 | $1,332.50 | $131.38 | |
| $10.50 | 130 | $1,365.00 | $130.49 | $10.50 | 130 | $1,365.00 | $134.59 | |
| $10.75 | 130 | $1,397.50 | $133.60 | $10.75 | 130 | $1,397.50 | $137.79 | |
| $11.00 | 130 | $1,430.00 | $136.71 | $11.00 | 130 | $1,430.00 | $141.00 | |
| $11.25 | 130 | $1,462.50 | $139.82 | $11.25 | 130 | $1,462.50 | $144.20 | |
| $11.50 | 130 | $1,495.00 | $142.92 | $11.50 | 130 | $1,495.00 | $147.41 | |
| $11.75 | 130 | $1,527.50 | $146.03 | $11.75 | 130 | $1,527.50 | $150.61 | |
| $12.00 | 130 | $1,560.00 | $149.14 | $12.00 | 130 | $1,560.00 | $153.82 | |
| $12.25 | 130 | $1,592.50 | $152.24 | $12.25 | 130 | $1,592.50 | $157.02 | |
| $12.50 | 130 | $1,625.00 | $155.35 | $12.50 | 130 | $1,625.00 | $160.23 | |
| $12.75 | 130 | $1,657.50 | $158.46 | $12.75 | 130 | $1,657.50 | $163.43 | |
| $12.92 | 130 | $1,679.60 | $160.57 | $12.92 | 130 | $1,679.60 | $165.61 | |
| $13.00 | 130 | $1,690.00 | $161.56 | $13.00 | 130 | $1,690.00 | $166.63 | |
| $13.25 | 130 | $1,722.50 | $164.67 | $13.25 | 130 | $1,722.50 | $169.84 | |
| $13.50 | 130 | $1,755.00 | $167.78 | $13.50 | 130 | $1,755.00 | $173.04 | |
| $13.75 | 130 | $1,787.50 | $170.89 | $13.75 | 130 | $1,787.50 | $176.25 | |
| $14.00 | 130 | $1,820.00 | $173.99 | $14.00 | 130 | $1,820.00 | $179.45 | |
| $14.25 | 130 | $1,852.50 | $177.10 | $14.25 | 130 | $1,852.50 | $182.66 | |
| $14.50 | 130 | $1,885.00 | $180.21 | $14.50 | 130 | $1,885.00 | $185.86 | |
| $14.75 | 130 | $1,917.50 | $183.31 | $14.75 | 130 | $1,917.50 | $189.07 | |
| $15.00 | 130 | $1,950.00 | $186.42 | $15.00 | 130 | $1,950.00 | $192.27 | |
| $15.25 | 130 | $1,982.50 | $189.53 | $15.25 | 130 | $1,982.50 | $195.47 | |
| $15.50 | 130 | $2,015.00 | $192.63 | $15.50 | 130 | $2,015.00 | $198.68 | |
| $15.75 | 130 | $2,047.50 | $195.74 | $15.75 | 130 | $2,047.50 | $201.88 | |
| $16.00 | 130 | $2,080.00 | $198.85 | $16.00 | 130 | $2,080.00 | $205.09 | |
| $16.25 | 130 | $2,112.50 | $201.96 | $16.25 | 130 | $2,112.50 | $208.29 | |
| $16.50 | 130 | $2,145.00 | $205.06 | $16.50 | 130 | $2,145.00 | $211.50 | |
| $16.75 | 130 | $2,177.50 | $208.17 | $16.75 | 130 | $2,177.50 | $214.70 | |
| $17.00 | 130 | $2,210.00 | $211.28 | $17.00 | 130 | $2,210.00 | $217.91 | |
| $17.25 | 130 | $2,242.50 | $214.38 | $17.25 | 130 | $2,242.50 | $221.11 | |
| $17.50 | 130 | $2,275.00 | $217.49 | $17.50 | 130 | $2,275.00 | $224.32 | |
| $17.75 | 130 | $2,307.50 | $220.60 | $17.75 | 130 | $2,307.50 | $227.52 | |
| $18.00 | 130 | $2,340.00 | $223.70 | $18.00 | 130 | $2,340.00 | $230.72 | |
| $18.25 | 130 | $2,372.50 | $226.81 | $18.25 | 130 | $2,372.50 | $233.93 | |
| $18.50 | 130 | $2,405.00 | $229.92 | $18.50 | 130 | $2,405.00 | $237.13 | |
| $18.75 | 130 | $2,437.50 | $233.03 | $18.75 | 130 | $2,437.50 | $240.34 | |
| $19.00 | 130 | $2,470.00 | $236.13 | $19.00 | 130 | $2,470.00 | $243.54 | |
| $19.25 | 130 | $2,502.50 | $239.24 | $19.25 | 130 | $2,502.50 | $246.75 | |
| $19.50 | 130 | $2,535.00 | $242.35 | $19.50 | 130 | $2,535.00 | $249.95 | |
| $19.75 | 130 | $2,567.50 | $245.45 | $19.75 | 130 | $2,567.50 | $253.16 | |
| $20.00 | 130 | $2,600.00 | $248.56 | $20.00 | 130 | $2,600.00 | $256.36 | |
| $20.25 | 130 | $2,632.50 | $251.67 | $20.25 | 130 | $2,632.50 | $259.56 | |
| $20.50 | 130 | $2,665.00 | $254.77 | $20.50 | 130 | $2,665.00 | $262.77 | |
| $20.75 | 130 | $2,697.50 | $257.88 | $20.75 | 130 | $2,697.50 | $265.97 | |
| $21.00 | 130 | $2,730.00 | $260.99 | $21.00 | 130 | $2,730.00 | $269.18 | |
| $21.25 | 130 | $2,762.50 | $264.10 | $21.25 | 130 | $2,762.50 | $272.38 | |
| $21.50 | 130 | $2,795.00 | $267.20 | $21.50 | 130 | $2,795.00 | $275.59 | |
| $21.75 | 130 | $2,827.50 | $270.31 | $21.75 | 130 | $2,827.50 | $278.79 | |
| $22.00 | 130 | $2,860.00 | $273.42 | $22.00 | 130 | $2,860.00 | $282.00 | |
| $22.25 | 130 | $2,892.50 | $276.52 | $22.25 | 130 | $2,892.50 | $285.20 | |
| $22.50 | 130 | $2,925.00 | $279.63 | $22.50 | 130 | $2,925.00 | $288.41 | |
| $22.75 | 130 | $2,957.50 | $282.74 | $22.75 | 130 | $2,957.50 | $291.61 | |
| $23.00 | 130 | $2,990.00 | $285.84 | $23.00 | 130 | $2,990.00 | $294.81 | |
| $23.25 | 130 | $3,022.50 | $288.95 | $23.25 | 130 | $3,022.50 | $298.02 | |
| $23.50 | 130 | $3,055.00 | $292.06 | $23.50 | 130 | $3,055.00 | $301.22 | |
| $23.75 | 130 | $3,087.50 | $295.17 | $23.75 | 130 | $3,087.50 | $304.43 | |
| $24.00 | 130 | $3,120.00 | $298.27 | $24.00 | 130 | $3,120.00 | $307.63 | |
| $24.25 | 130 | $3,152.50 | $301.38 | $24.25 | 130 | $3,152.50 | $310.84 | |
| $24.50 | 130 | $3,185.00 | $304.49 | $24.50 | 130 | $3,185.00 | $314.04 | |
| $24.75 | 130 | $3,217.50 | $307.59 | $24.75 | 130 | $3,217.50 | $317.25 | |
| $25.00 | 130 | $3,250.00 | $310.70 | $25.00 | 130 | $3,250.00 | $320.45 | |
| $25.25 | 130 | $3,282.50 | $313.81 | $25.25 | 130 | $3,282.50 | $323.65 | |
| $25.50 | 130 | $3,315.00 | $316.91 | $25.50 | 130 | $3,315.00 | $326.86 | |
| $25.75 | 130 | $3,347.50 | $320.02 | $25.75 | 130 | $3,347.50 | $330.06 | |
| $26.00 | 130 | $3,380.00 | $323.13 | $26.00 | 130 | $3,380.00 | $333.27 | |
| $26.25 | 130 | $3,412.50 | $326.24 | $26.25 | 130 | $3,412.50 | $336.47 | |
| $26.50 | 130 | $3,445.00 | $329.34 | $26.50 | 130 | $3,445.00 | $339.68 | |
| $26.75 | 130 | $3,477.50 | $332.45 | $26.75 | 130 | $3,477.50 | $342.88 | |
| $27.00 | 130 | $3,510.00 | $335.56 | $27.00 | 130 | $3,510.00 | $346.09 | |
| $27.25 | 130 | $3,542.50 | $338.66 | $27.25 | 130 | $3,542.50 | $349.29 | |
| $27.50 | 130 | $3,575.00 | $341.77 | $27.50 | 130 | $3,575.00 | $352.50 | |
| $27.75 | 130 | $3,607.50 | $344.88 | $27.75 | 130 | $3,607.50 | $355.70 | |
| $28.00 | 130 | $3,640.00 | $347.98 | $28.00 | 130 | $3,640.00 | $358.90 | |
| $28.25 | 130 | $3,672.50 | $351.09 | $28.25 | 130 | $3,672.50 | $362.11 | |
| $28.50 | 130 | $3,705.00 | $354.20 | $28.50 | 130 | $3,705.00 | $365.31 | |
| $28.75 | 130 | $3,737.50 | $357.31 | $28.75 | 130 | $3,737.50 | $368.52 | |
| $29.00 | 130 | $3,770.00 | $360.41 | $29.00 | 130 | $3,770.00 | $371.72 | |
| $29.25 | 130 | $3,802.50 | $363.52 | $29.25 | 130 | $3,802.50 | $374.93 | |
| $29.50 | 130 | $3,835.00 | $366.63 | $29.50 | 130 | $3,835.00 | $378.13 | |
| $29.75 | 130 | $3,867.50 | $369.73 | $29.75 | 130 | $3,867.50 | $381.34 | |
| $29.92 | 130 | $3,889.99 | $371.88 | $29.92 | 130 | $3,889.99 | $383.55 | |
