AFFORDABILITY PERCENTAGE

The IRS has lowered the affordability percentage from 9.86% to 9.78%. What does this mean for you? It could mean you, an applicable large employer, are obligated to pay a higher contribution to employee health-care. There are substantial penalties if an employer neglects to put these changes into place this upcoming year.

You have three options (Safe Harbors) to calculate the contribution an employee must make. 

1. The employees W-2 Wages: This is most useful for full-time employees. 

Refer to Box 1 in your employees W-2 form. There, you will find total wages, tips, compensation, etc. 

Box 1 $    x9.78% = Employees Contribution Per Month

2. The employee’s rate of pay: Only use this method if you have an hourly paid worker.  

Hourly Wage  x130 Hours Worked    x9.78%   =Employee Contribution per Month

Note** Use your employees lowest monthly wage for hourly wage. Even if your employee worked more than 130 hours, you must use this number. 

3. The individual FPL (Federal Poverty Level): This is most useful for seasonal employees.

Year2019 FPLRateEmployee Contribution per Month
2020$12,4909.78%$101.79

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