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Affordable Coverage

The law requires that for employee’s who have family income that is less than 4 times the federal poverty level, the cost of family coverage cannot exceed 9.5% of the family’s modified adjusted gross income.  Because it is essentially impossible for an employer to determine the family income of it’s employees, the IRS has issued a safe harbor rule that instead permits an employer to use an employee’s W-2 wages instead.   The employer may also use the employee’s hourly rate of pay x 130 hours.  The employer may also use 100% of the federal poverty level.

Under this rule, the employee’s cost share for employee only coverage cannot exceed 9.5% of the employee’s income.  For 2013 the federal poverty level is $11,490 for the 48 states & DC.  Four times this works out to be $45,960.

 

Examples – Assume $5,000 Annual Employee Only Premium

AffordableCoverage

As long as the employee’s share of the employee only premium is less than the numbers above, the coverage will be considered “affordable”.

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