The Employer Mandate guidelines state that coverage is affordable when an employee has to pay no more than 9.5% of their household income (inflation-adjusted to 9.83% for the 2021 plan year) for self-only coverage which is offered, but which employers know the household income of an employee? As a result, there are three alternative methods that an employer can rely upon when determining if the coverage they offer is affordable. These methods are explained below and some general examples of how to apply each method have also been provided.

The Internal Revenue Service recently released Revenue Procedure 2019-29 which included details on the affordability percentage related to the Employer Shared Responsibility provisions of the Affordable Care Act (ACA), also known as the Employer Mandate. In 2020, an applicable large employer (ALE) will be considered to offer affordable coverage to its full-time employees if the cost of coverage is 9.78% or less of the employee’s household income.