HR Fast Facts: Calculating W-2 Wages for ACA Affordability Safe Harbor

If an employer satisfies the requirements for this safe harbor, their health insurance coverage offering will be considered affordable under the Affordable Care Act employer mandate.

Who should use the W-2 Wages Safe Harbor?

This safe harbor may be most useful to an employer with full-time employees who regularly work 40 hours per week and whose compensation is unlikely to decrease during the year.

How to use the W-2 Wages Safe Harbor

Refer to Box 1 of an employee’s current year W-2 form. If the employee’s health coverage premium is not more than:

• 9.61% for plan years beginning in 2022
• 9.83% for plan years beginning in 2021
• 9.78% for plan years beginning in 2020
• 9.86% for plan years beginning in 2019

of Box 1, your coverage is considered affordable under the employer mandate.

Disadvantages of W-2 Wages Safe Harbor

This safe harbor counts only earned wages and does not permit an employer to impute income that would have been earned had they not taken a leave of absence. Box 1 income does not include pre-tax contributions, which will reduce the maximum affordable amount; this must be calculated monthly for every employee in your company. For more information, please click here.