Q: Does an employer’s cash-out option (i.e., cash-in-lieu of benefits) have any impact on the coverage’s affordability under the employer mandate?
A: Yes. As background, under the employer mandate, the employer must offer at least one affordable, minimum value plan to all full-time employees, or risk a penalty.
Affordability is based on the cost to the full-time employee for single-only coverage. Generally speaking, coverage is affordable if the cost of single-only coverage does not exceed 9.5 percent of that employee’s W2 wages or 9.5 percent of that employee’s rate-of-pay. (There is also a way to determine affordability based on the federal poverty line.)