DEFINITIONS
W-2 Safe Harbor:
The W-2 safe harbor uses the employee’s annual W-2 (Box 1 value) and treats coverage as affordable if the employee contribution for the year does not exceed 9.78% of the W-2 value.
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 9.78% of the employee’s rate of pay.
Federal Poverty Line Safe Harbor:
The Federal Poverty Line safe harbor uses the federal poverty line for the year ($12,760 in 2020), and treats coverage as affordable if the employee contribution for the year does not exceed 9.78% of the federal poverty line value. This means that if the cost of coverage per month for an employee during the 2020 reporting year does not exceed $101.79 per month, then the FPL Safe Harbor applies. IRS Calculation = (prior year’s federal poverty level) x 9.78% = $101.79.