The Rate of Pay safe harbor is one of the IRS-approved methods employers can use to determine if their health coverage is affordable under the ACA’s employer mandate.
It’s designed to be simple and predictable, using an employee’s hourly rate or monthly salary to calculate the maximum amount they can be required to pay for self-only coverage.
🧮 How It Works:
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For hourly employees:
Multiply the employee’s hourly rate × 130 hours per month, then apply the affordability percentage (9.02% for 2025).
Example: $15/hour × 130 = $1,950 → $1,950 × 9.02% = $176/month max -
For salaried employees:
Multiply the monthly salary × 9.02%
Example: $3,000/month × 9.02% = $270.60/month max
This method is especially useful for employers with large hourly workforces because it avoids needing to know an employee’s actual income or W-2 wages.
Note: You must use the lowest hourly rate or salary the employee earns during the year, not their average.