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

1.Who should use the rate of pay safe harbor?
2.How to use the rate of pay safe harbor
3.Disadvantages of 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.

This article is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance. TriNet is the single-employer sponsor of all its benefit plans, which does not include voluntary benefits that are not ERISA-covered group health insurance plans and enrollment is voluntary. Official plan documents always control and TriNet reserves the right to amend the benefit plans or change the offerings and deadlines.

This article may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.