This month, the Treasury Department and the IRS issued Notice 2011-73 to request comments on a proposed affordability safe harbor for employers under PPACA. As you know, effective Jan. 1, 2014, certain employers will pay a penalty if they don't provide "comprehensive, affordable health insurance coverage" to employees (referred to as the "shared responsibility" provision). The notice solicits comments on the safe harbor which would make it easier for employers to determine whether the health coverage they offer is in fact affordable.

Under PPACA, the shared responsibility provision applies to:

• Employers with 50 or more full-time employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment.
• Employers with 50 or more full-time employees that do offer coverage but have at least one full-time employee receiving a premium tax credit will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees from the assessment.

Prior to the notice, concerns arose that employers would base their affordability calculations on the employees' household income (which employers generally do not have access to). The proposed safe harbor would permit employers that offer coverage to their employees to measure the affordability of coverage by using wages that the employer paid to an employee, instead of the employee's household income.

The safe harbor applies if the employee portion of the self-only premium for the employer's lowest-cost plan that provides minimum value does not exceed 9.5 percent of the employee's current W-2 wages from the employer. It would also only apply for purposes of the employer shared responsibility provision, and would not affect employees' eligibility for health insurance premium tax credits.

Click here to read Notice 2011-73.