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ObamaCare FAQ of the Month: What is "Affordable" Employer-Sponsored Coverage?

March 2014

By: Peter E. Hansen, Esq.

Employer-Sponsored Coverage is affordable if the employee's required contribution for self-only coverage does not exceed 9.5% of his or her household income for the taxable year. First and most importantly, note that the cost of self-only coverage - and not family coverage - determines affordability. Second, note that an employee's household income determines affordability.

Obviously, most employers will not know the amount of their employees' household income, so the federal government provided three alternative tests to measure affordability. Under the alternative standards, employer-sponsored coverage is affordable if the employee's required contribution for self-only coverage does not exceed:

  • 9.5% of the employee's W-2 wages;
  • 9.5% of the employee's rate of pay, measured at the start of each month, multiplied by 130 hours per month; or
  • 9.5% of the federal poverty level for a single individual.

    If any of the above three alternative tests are met, or if the original household income test is met, then the employer offers affordable coverage.

    Questions? Suggestion for a future ObamaCare FAQ of the Month? Please contact WS Attorney Peter E. Hansen at (262) 560-9696, or email pehansen@wesselssherman.com.