Q: Our company’s health insurance plan is member-level rated. Can we legally use a tiered contribution model for employees’ health benefits?
- C-level — Up to $900 or full premium, whichever is less.
- Salaried — Up to 50% of premium or $700 per month, whichever is lowest
- Hourly — up to 50% (of premium) or $600
A: The hidden question here is whether your organization’s tiered contribution plan meets federal requirements for affordable health coverage. If so, a tiered contribution model for employees’ health benefits is acceptable. If not, prudent revisions are in order.
For 2017, coverage is currently deemed affordable if the lowest-cost, self-only coverage option does not exceed 9.69% of an employee’s:
- W-2 wages,
- Rate of pay or
- The federal poverty line
The Internal Revenue Service (IRS) provided the following guidance on the percentages used to determine “affordable” health coverage. This will help your contribution model not only meet IRS guidelines, but also be compliant with the Affordable Care Act (ACA).
The IRS also has a frequently asked questions on this topic that you may find helpful.