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Rule Summary for Safe Harbor Pay Rate

Summary of Rules Regarding the Rate of Pay Safe Harbor for Determining Affordability for the Employer’s Shared Responsibility

The Facts

Rate of Pay Safe Harbor 
The rate of pay safe harbor was designed to allow employers to prospectively satisfy affordability without the need to analyze every employee’s wages and hours. 

For hourly employees, the rate of pay safe harbor allows an employer to: 
Use the rate of pay for the lowest paid hourly employee on the first day of the plan year.

  • Take the lower of the hourly employee’s rate of pay as of the first day of the coverage period (generally, the first day of the plan year) or the employee’s lowest hourly rate of pay during the calendar month;
  • Multiply that rate by 130 hours per month (the benchmark for full-time status for a month); and
  • Determine affordability for the calendar month based on the resulting monthly wage amount. 
    Specifically, the employee’s monthly contribution amount (for the self-only premium of the employer’s lowest cost coverage that provides minimum value) is affordable for a calendar month if it is equal to or lower than 9.5 percent of the computed monthly wages (that is, the employee’s applicable hourly rate of pay multiplied by 130 hours).
    The final regulations, unlike the proposed regulations, permit an employer to use the rate of pay safe harbor even if an hourly employee’s rate of pay is reduced during the year.


Lowest Paid Employee's Hourly Rate of Pay___________$8.00
x 130 hours$1,040.00
x 9.56%$99.43

$99.43 = the maximum an employee can be charged per month for the lowest-cost employee only coverage 
option offered

For salaried employees, monthly salary as of the first day of the coverage period would be used instead of hourly salary multiplied by 130 hours. However, if the monthly salary is reduced, including due to a reduction in 
work hours, the rate of pay safe harbor may not be used. 

Disclaimer:  This summary contains general information only and is not intended as legal advice.  Consult your attorney for legal advice pertaining to your company and situation.

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