Employer coverage is considered affordable, as it relates to eligibility for the Advanced Premium Tax Credit, if the employee only cost of the lowest cost plan is less than 9.83% of the household income (changed from 9.78% in 2020 to 9.83% on January 1st, 2021).
Hourly employees can use this formula: Hourly rate x 130 = Monthly salary. W2 calculations.
The 9.83% affordability factor only applies to employee-only premiums. Also, it doesn’t matter if the spouse and/or children are currently enrolled in the coverage or not. Even if the employer doesn’t pay anything to cover the spouse and/or children your family will not be eligible for the Advanced Premium Tax Credit if the employee-only premiums are affordable.
In other words, if your share of your premiums for a plan that covers only you (the employee)–not your family–is less than 9.83% of your family’s income, the plan is considered affordable. You may pay more than 9.83% of your income on premiums for spouse or family coverage from your employer. But affordability is determined only by the amount you’d pay for self-only coverage from your employer.
However, if the employer plan does not cover “minimum value” then the employee could be eligible for the Advanced Premium Tax Credit. A health plan meets the Minimum Value standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population. Most comprehensive health insurance plans will meet this standard.