select affordability Safe harbor

Safe Harbors in the Affordable Care Act are methods for an employer to demonstrate that it provides affordable coverage to its employees as defined by the act. There are 3 affordability safe harbors an ALE can use to determine whether or not coverage is “affordable” for a certain employee for purposes of complying with the employer mandate. 

Definition of Affordability

• The indexed percentage (originally 9.5%, but indexed each year) is used by ALEs to determine whether or not the employer’s coverage is considered affordable for that employee. 

• The 3 safe harbor methods include: 

1. Rate of Pay

2. W-2

3. Federal Poverty Level