Glossary · Benefits
ACA Affordability Threshold
The maximum percentage of an employee's household income that the employee's required contribution for self-only coverage may equal under the ACA employer mandate.
For Applicable Large Employers, employee-only contribution for the lowest-cost minimum-value plan must not exceed an annually adjusted percentage of the employee's income (using one of three IRS safe harbors: W-2, rate-of-pay, or federal poverty line).
Failing the affordability test for any full-time employee can trigger 4980H(b) employer-shared-responsibility penalties. PEO benefits administration typically includes affordability monitoring and 1095-C coding.
Related terms
- ACA (Affordable Care Act)Federal law governing employer-sponsored health coverage, including employer-mandate, reporting (1094/1095), and minimum-essential-coverage requirements.
- MLR (Medical Loss Ratio)The percentage of health-insurance premiums spent on medical claims and quality improvement, as opposed to administration and profit.
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