The Treasury Department and Internal Revenue Service (IRS) are requesting public comment on a proposed affordability safe harbor for employers under the shared responsibility provisions included in the Affordable Care Act that will apply to certain employers starting in 2014.

Background on Shared Responsibility Payments 

Under the Affordable Care Act, employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees may be required to make a shared responsibility payment.

  • Coverage under an employer-sponsored plan is affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.5% of the employee's household income for the taxable year.
  • Household income for this purpose is defined as the modified adjusted gross income of the employee and any members of the employee's family (which would include any spouse and dependents) who are required to file an income tax return.

Proposed Affordability Safe Harbor for Employers 

According to Notice 2011-73, because affordability is determined by reference to household income and because household income is determined by reference to variables that are generally unknown to an employer (i.e., the modified adjusted gross income of the employee and the employee's spouse and dependents), employers may encounter practical difficulties in assessing whether the coverage they are offering is affordable to certain employees.


To address this concern and provide employers a more workable option for determining the affordability of their health coverage, Treasury and the IRS expect to propose a safe harbor permitting employers that offer coverage to their employees to measure the affordability of that coverage by using wages that the employer paid to an employee (as reported on Form W-2), instead of the employee's household income. This safe harbor would only apply for purposes of the employer shared responsibility payment, and would not affect employees' eligibility for health insurance premium tax credits.

Request for Comments 

Notice 2011-73 invites comments from the public on the proposed affordability safe harbor for employers, including whether or how wages and employee contribution amounts would need to be determined for employees who are employed by an employer for less than a full year or who move between full- and part-time status. Comments must be submitted by December 13, 2011.


You may review the entire request for comments, including the specific input solicited, by clicking here. To read more about employer responsibilities under the Affordable Care Act, please visit the HR360 Health Care Reform section. 

Topics: Health Care Reform

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