With two reporting year behind us we may be thinking that we’ve got this ACA thing down and there is nothing more to learn (or maybe we just don’t want to!). Yet, making sure that your company is using safe harbors efficiently could lead to improved methods of determining affordability and make 2018 and beyond run even smoother.

By now we have all seen the words “Safe Harbor” and we might even think we know all there is to know about them – but let’s re-evaluate what these important tools are and how they benefit us. Here’s a brief rundown of each safe harbor and what they mean.

  • W-2 Safe Harbor: Generally considered the more difficult to determine safe harbor, affordability is determined solely on the wages paid to the employee (and any other member of the same Applicable Large Employer (ALE) that pays wages to that employee) as reported in Box 1 of the employee’s Form(s) W-2.
  • Rate of Pay Safe Harbor: Coverage is determined as affordable for a calendar month if the employee’s responsibility does not exceed 9.56% (for 2018) of an amount equal to 130 hours multiplied by the lower of the employee’s hourly rate of pay as of the first day of the calendar month. For non-hourly employees, the employee’s responsibility cannot exceed 9.56% of the employee’s monthly salary, as of the first day of the coverage period. This safe harbor may be applied to hourly as well as salaried employees. Rate of pay may get relatively complicated.
  • Federal Poverty Line Safe Harbor: Generally considered the simplest measure of affordability, this safe harbor bases affordability off of the federal poverty line. For 2018, the employee’s monthly required contribution is based off of 9.56% of the federally mandated $12,140 annua