Ask the HR Expert — August 8, 2017

on August 4, 2017

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.

Kathryn Carlson

Kathryn Carlson

Kathryn Carlson is the Vice President, Product Management for KPA. She focuses on developing compliance and workforce management solutions that combine innovative software, online training and on-site audit/loss control services for our clients.

Kathryn has over 25 years of product management, and product marketing experience and is certified as a HRCI Senior Professional Human Resources (SPHR) and SHRM-Certified Senior Professional (SHRM-SCP).

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Kathryn CarlsonAsk the HR Expert — August 8, 2017