Minimum Value and Affordability


Basic Information

  • In general, under the employer shared responsibility provisions, an applicable large employer (ALE) member may either offer affordable minimum essential coverage that provides minimum value to its full-time employees (and their dependents) or potentially owe an employer shared responsibility payment to the IRS.  


  • There are two potential employer shared responsibility payments. Whether the minimum essential coverage offered by an employer to its full-time employees is affordable and provides minimum value is relevant for the second type of employer shared responsibility payment. That payment applies if an ALE member offers minimum essential coverage to its full-time employees and their dependents but, despite that, at least one full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace. A full-time employee could receive the premium tax credit if the employee was offered minimum essential coverage that either was not affordable for that employee or did not provide minimum value.

Minimum Value 

An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. See Notice 2014-69PDF for additional guidance regarding whether an employer-sponsored plan provides minimum value coverage if the plan fails to substantially cover in-patient hospitalization services or physician services. Under proposed regulationsPDF upon which taxpayers may rely, employers generally must use a minimum value calculator developed by HHS to determine if a plan with standard features provides minimum value.  Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features. The proposed regulations also describe certain safe harbor plan designs that will satisfy minimum value.


Because employers are not likely to know the household income of their employees, there are three safe harbors that an employer may use to determine affordability for purposes of the employer shared responsibility provisions.  (These safe harbors do not affect whether an employee’s coverage is affordable for purposes of determining the employee’s eligibility for the premium tax credit.)  In general, under these employer shared responsibility affordability safe harbors, employers are allowed to use Form W-2 wages, an employee’s rate of pay, or the federal poverty line, instead of household income in making the affordability determination. For more information about the safe harbors, see our Question and Answer page and section 54.4980H-5 of the ESRP regulations.

More Information

More information about the employer shared responsibility provisions is available in our Questions and Answers. The Department of the Treasury and the IRS have also issued the following legal guidance related to the employer shared responsibility provisions:

More information is also available in this fact sheet issued by the U.S. Department of the Treasury.