Large employers could avoid penalties under the 2010 federal healthcare law—based on their offering too-costly insurance to their employees—through a newly proposed simplified calculation of their employees' salaries.
Feds seek input on proposed change in worker salary calculation
The Treasury Department and the Internal Revenue Service are seeking public comment (PDF) on a proposed workaround of a requirement in the Patient Protection and Affordable Care Act that large employers calculate whether their insurance policies are “affordable” to their workers. That determination is based on how their insurance costs compare to the modified adjusted gross income of both the employee and the employee’s spouse and dependents, which are unknowable to the employer, today’s announcement acknowledged.
Instead, the change, which has not yet been formally proposed through agency rulemaking, would allow employers subject to the requirement to determine affordability simply by comparing the employee’s taxable wages with what the company charges them for insurance coverage.
Such a so-called safe harbor calculation, in conjunction with the employer offering “minimum essential coverage” for which an employee did not have to pay more than 9.5% of their wages, would allow the company to escape fines under the law. That protection would hold even if the employee subsequently obtained taxpayer-subsidized coverage on a state insurance exchange—a move which would have triggered fines for the employer under the health law.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.