Employee Navigator- ACA Filing- Assigning Safe Harbors for Affordability

A health plan is considered affordable for an employee if the employee's required contribution does not exceed 9.61% of the employee's household income. Because it is difficult to know an employee's household income, employers are able to use three safe harbors to determine affordability. It is important to note that safe harbors must be applied consistently to a reasonable grouping of employees. 

W-2 safe harbor: The W-2 safe harbor uses the employee’s annual W-2 wages (Box 1 value) and treats coverage as affordable if the employee contribution for the year does not exceed 9.61% of the W-2 value.  

• When assigning the  W-2 Safe Harbor,be sure that there is a previous year W-2 value in the employees profile. For the 2022 reporting year, you need to use the employee's 2022 W-2 Box 1 value needs to be populated in this field.  If this value is not in the employee's profile the W-2 Safe Harbor cannot be assigned.
• You can find this value under the employees Profile>>>Compensation>>>Reporting Year W2 Earnings. 

Rate of Pay safe harbor: The Rate of Pay safe harbor uses the employee’s rate of pay and treats coverage as affordable if the employee contribution for the year does not exceed 9.61% of the employee's rate of pay. 

• When assigning the Rate of Pay Safe Harbor, be sure that a salary has been added for this employee. If this value is not in the employee's profile, the Rate of Pay Safe Harbor cannot be assigned. Either an hourly rate or salary can be used in the calculation. If both an hourly rate and salary have been added for the employee, EN will use the hourly rate for the calculation. Employees eligible for this safe harbor whose yearly cost of coverage (monthly employee class-based cost x 12) divided by their salary or salary equivalent (excluding employees who have a $0 salary since we can't divide by 0) is less than 9.61%.
• You can find the salary information of an employee under the employee's Profile>>>Compensation.

Federal Poverty Line safe harbor: The Federal Poverty Line safe harbor uses the federal poverty line for the year ($12,880 in 2022), and treats coverage as affordable if the employee contribution for the year does not exceed 9.61% (2022 affordability percentage) of the federal poverty line value.  This means that if the cost of coverage per month for the 2022 reporting year for the employee does not exceed $103.15 per month, then the FPL applies.

Expectation for plans that start mid- year:

• The federal poverty level applies to the plan year, not to the calendar year. NOTE: The W2 and Rate of Pay safe harbors apply to the calendar year (all of the current reporting year).
• Ex. A group has a 07/01/2021 plan and a 07/01/2022 plan configured. The FPL calculation for the 2020 reporting year will be applied for Jan-June on the 1095 form and from July-Dec the 2022 FPL will be applied.

Remember, some codes trump other codes. When 1A is populated on line 14, no value or code is needed for lines 15 or 16 because the 1A means the EE received a qualifying offer that was affordable. When an employee accepts an unaffordable offer and enrolls in the plan, a 2C is generated for line 16, so no safe harbor code is needed – the employee accepted the unaffordability and enrolled. Safe harbor codes for line 16 will only be populated, if applicable, when the following unaffordable codes are populated for line 14: 1B, 1C, 1D, 1E, 1J or 1K.