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

September 2014

By: Peter E. Hansen, Esq.

Fans of the Obamacare FAQ of the Month - and I assume there are many of you - will recall that I already addressed "affordable" coverage in March 2014. At the time, employer-sponsored coverage met the definition of "affordable" if the employee's required contribution for self-only coverage did not exceed 9.5% his or her household income for the taxable year. This has changed very, very slightly since March: from 9.5% to 9.56%.

The change prompted many to understandably believe that the new 9.56% figure also applied to the three alternative tests to determine 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.

Unfortunately, the 9.56% figure does not apply to the three alternative tests. This is because the definition of "affordable" includes an "applicable percentage" that allows for and anticipates adjusting the 9.5% figure, but the alternative tests do not. As a result, the regulatory definition of "affordable" technically has no impact on the alternative tests, so those will remain at 9.5% unless and/or until we receive updated guidance. 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 .