HR Fast Facts: What Is Rate of Pay Safe Harbor?

If an employer satisfies the requirements for this Safe Harbor that proves Affordable Care Act (ACA) affordability, their insurance coverage offering will be considered affordable under the employer mandate.

Who should use the rate of pay safe harbor?

This safe harbor may be most useful for employers with hourly employees and the need for a fast, “failsafe” calculation method. If the Rate of Pay safe harbor is met for your lowest-paid worker, then it will also be met for the rest of your workforce.

How to use the rate of pay safe harbor

Multiply an hourly worker's lowest pay rate during the calendar month by 130 hours. If their 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 this amount, your coverage is considered affordable under the employer mandate.

Disadvantages of rate of pay safe harbor

You can only multiply the hourly pay rate by 130 hours per month, even if your staff actually works more hours. If you have any workers who are paid purely on commission, you cannot select this safe harbor. You cannot use the rate of pay safe harbor for any salaried individuals who experience a pay reduction in any month.