How is ACA affordability determined for an employer?

• A. Based on the employee's required contribution relative to an affordability standard
• B. Based on the employer's revenue
• C. Based on the plan's actuarial value
• D. Based on the number of full-time employees

Answer: (A)

Affordability is judged by comparing what the employee would pay for the lowest-cost self-only health plan to a defined IRS standard. If the employee’s share is at or below that affordability threshold, the offer is considered affordable. The standard is a percentage of the employee’s income (updated annually), with optional safe harbors based on W‑2 wages or federal poverty level to simplify testing. This means affordability hinges on the employee’s required premium, not on how much revenue the employer has, the plan’s actuarial value, or how many full-time employees are in the business.