The cost of health insurance for an employee must not exceed 9.12 percent of the employee’s income.
That means: the monthly premium for the lowest-cost silver plan, minus the ICHRA monthly allowance being offered, cannot be over 9.12 percent of the employee’s monthly household income.
Here’s how to calculate it:
- Employee annual household income x .0912 =
- Take that number and divide it by 12 to get the monthly number
- Then, take that number and subtract it from the lowest-cost silver plan
Example: Annual income is $50,000. Affordable = $50,000 X .0912 / 12 = $380. Lowest cost Silver Plan = $500. $500 – $380 = $120. IF THE EMPLOYER CONTRIBUTES $120 FOR THIS EMPLOYEE THE PLAN IS AFFORDABLE AND COMPLIES WITH THE ACA AFFORDABILITY RULE.
NOTE: IF THE EMPLOYER PLAN IS NOT AFFORDABLE AND THE EMPLOYEE SEEKS AND RECEIVES A TAX SUBSIDY THOUGH THE EXCHANGE THE EMPLOYER IS SUBJECT TO AN ACA PENALTY OF NO MORE THAN $372/MO (2024).
