RTI 2000 Human Resources (HR) is required for the new healthcare features. To add HR, contact RTI at 800.937.1290.
Updated Healthcare Resources
We are creating short training videos to help you take advantage of the healthcare features. To view these videos, please see the section titled RTI 2000 Healthcare Training Videos on our website.
We’re also frequently updating our FAQs to provide you with the most current information on healthcare compliance with RTI Payroll/HR. For easy access, save the page as a favorite.
RTI has developed a simple process in RTI Payroll/HR that enables you to easily handle employee qualification, reporting, recording, and tracking for the Affordable Care Act (ACA).
In an ongoing series of healthcare bulletins, RTI will highlight individual and important aspects of ACA compliance and how—with RTI—you can prepare your company to meet the new requirements.
Affordability Testing with Safe Harbors
The Affordable Care Act includes three “safe harbor” methods to ensure your healthcare options meet the law’s affordability standards.
A safe harbor is a way of testing your employees’ insurance contribution amounts to ensure they meet the affordability requirements of the Affordable Care Act. Currently, the standard is 9.5% of the employee’s federal wages. In other words, the employee’s portion of the lowest tier insurance plan for single coverage cannot exceed 9.5% of their federal wages.
The three safe harbor methods are:
- Form W-2
- Rate of Pay
- Federal Poverty Level
IMPORTANT: Please Read Before Continuing
Please contact your healthcare consultant for advice on selecting the best safe harbor method for your company. You cannot select different safe harbor methods for different employees in the same department or job class. As a result, you may only need to implement one safe harbor method.
This bulletin reviews how all safe harbor methods work and how to implement them in RTI Payroll. If you already know which method is best for your company, you can navigate directly to detailed instructions for setting up your safe harbor method below.
Form W-2 Safe Harbor
The Form W-2 safe harbor determines affordability based on whether the insurance premium for single coverage on the lowest tier insurance plan exceeds 9.5% of the employee’s W-2 Box 1 wages.
RTI Payroll includes three new deduction options for the Form W-2 safe harbor:
- Deduction Method – Deduct 9.5% of Federal Wages
This option deducts 9.5% of the federal wages each pay period. As the employee’s wages fluctuate, so will the dollar amount of their insurance deduction. However, the deduction will always be 9.5% of their federal wages for the pay period.
For detailed instructions, see Form W-2 Safe Harbor: Deduction Method.
- Pay Run Limit – Limit is 9.5% of Federal Wages
This option deducts a flat amount for the employee’s insurance premium, up to 9.5% of federal wages for the pay period. If the deduction exceeds 9.5%, it will not be taken in full and instead will be capped at 9.5% of federal wages for the pay period.
For detailed instructions, see Form W-2 Safe Harbor: Pay Run Limit.
- Overall Limit – Deduct to 9.5% of YTD Federal Wages
This option also allows you to set a flat amount for the employee’s insurance premium each pay period, but it uses the employee’s year-to-date federal wages to determine if the full amount of the deduction can be withheld from the employee each pay period.
For detailed instructions, see Form W-2 Safe Harbor: Overall Limit.
Using any of these deduction options will help ensure you are meeting the affordability requirements of the Affordable Care Act by capping the deductions for the employee’s insurance premiums at 9.5% of their wages. With the W-2 safe harbor methods, the dollar amounts of the insurance deductions for hourly employees will change each pay period, which may cause questions from your employees.
Rate of Pay Safe Harbor
The Rate of Pay safe harbor uses either the employee’s hourly wage or monthly salary to determine the employee’s insurance premium cost. By multiplying the employee’s hourly wage by 130 hours you can determine the employee’s average monthly wage. 9.5% of this amount is the maximum allowed deduction for the employee’s insurance premium.
For an employee making minimum wage this safe harbor is calculated by multiplying an hourly wage of $7.25 by 130 (hours), which results in an average monthly wage of $942.50. 9.5% of this average monthly wage is $89.54 ($942.50 x 0.095), which is the amount that can be withheld for the employee’s portion of their insurance premium.
For a salaried employee, you would multiply their monthly salary by 9.5%.
For detailed instructions, see Rate of Pay Safe Harbor.
Federal Poverty Level Safe Harbor
The Federal Poverty Level (FPL) safe harbor determines coverage as affordable if the premium does not exceed 9.5% of the FPL for a single individual. The 2014 FPL is $11,670 and is used for calculating affordability for 2015 coverage.
Multiplying the FPL by 9.5% ($11,670 x .095) results in $1,108.65, which would be the employee’s annual cost for their insurance premium. Then, dividing by 12 produces a monthly premium of $92.39.
This safe harbor produces the same insurance deduction amount for all employees.
For detailed instructions, see Federal Poverty Level Safe Harbor.
Again, please contact your healthcare consultant for advice on selecting the best safe harbor method for your company.
For answers to other common questions about healthcare compliance with RTI software, visit our ACA page. If you have additional questions, call your RTI support team at 800.937.1290.
Stay Connected with RTI