Short answer: The rate-of-pay safe harbor measures ACA affordability using an employee’s hourly rate (× 130 hours) or monthly salary, applying the affordability percentage (9.96% for 2026), without needing to know actual income.
The rate-of-pay safe harbor is one of the IRS-approved methods employers can use to determine whether their health coverage is “affordable” under the ACA’s employer mandate. It is designed to be simple and predictable.
For hourly employees: multiply the hourly rate × 130 hours per month, then apply the affordability percentage (9.96% for 2026). Example: $15/hour × 130 = $1,950 $1,950 × 9.96% = about $194 per month maximum.
For salaried employees: multiply the monthly salary × 9.96%. Example: $3,000/month × 9.96% = about $298.80 per month maximum.
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. For hourly employees, use 130 hours times the lower of the hourly rate as of the first day of the coverage period or the lowest hourly rate during the calendar month. For salaried employees, use the monthly salary as of the first day of the coverage period, but the rate-of-pay safe harbor is not available if the salary is reduced (including from fewer hours) during the year.