Employer contribution strategy calculator

Compare contribution strategies

Enter how many employees are enrolled in each tier and the monthly premium for that tier, then the employer's percentage and a flat amount. The table prices all three strategies at once. The default is an 18-person enrollment: 10 employee-only, 3 employee and spouse, 2 employee and children, and 3 family, with a 70% contribution and a $600 flat amount.

Everything runs in the browser. The numbers you enter never leave the page.

The three strategies

• A percentage of every tier. The employer pays, say, 70% of whatever tier the employee picks. It is the most generous to families and the most expensive for the employer, and the employer's cost moves with every enrollment change and every renewal.
• A percentage of the employee-only rate. The employer pays 70% of the employee-only premium no matter which tier the employee picks, and the employee pays everything above it. Single employees get the same deal as the first strategy; families pay much more. This is the most common way small employers keep a budget under control.
• A flat dollar amount. The employer pays a fixed amount toward any tier, never more than the premium. The employer's cost is predictable and does not rise at renewal until the employer decides to raise it; employees absorb the renewal in the meantime.

There are variations: a higher percentage for employee-only coverage and a lower one for dependents, or a percentage of the cheapest plan's premium with employees paying the difference to buy up to a richer plan. Each is a blend of the three above, and the calculator's columns show the edges of the range.

A worked comparison

None of these is the right answer on its own. The question for the client is who they are trying to attract and keep. A company hiring senior engineers with families will lose candidates at $1,495 a month; a company of mostly single employees in their twenties may spend the difference better elsewhere.

Rules that limit the choice

• The carrier's minimum contribution. Most small group carriers require the employer to pay at least 50% of the employee-only premium. All three strategies need to clear it; a flat amount that falls below half the employee-only rate after a renewal can put the group out of compliance with the carrier's rule.
• Participation. Families who are priced out decline, and single employees who are priced out drop the group below the participation minimum. Check the result in the participation calculator.
• ACA affordability for employers with 50 or more full-time equivalents. Affordability is measured on the employee's cost for the lowest-cost employee-only coverage, not family coverage. An employee-only base strategy can be affordable for the employer-mandate test while family coverage costs a great deal.
• The family glitch fix. Since 2023, family members' eligibility for marketplace subsidies is tested on the cost of family coverage. When family coverage is expensive, spouses and children may qualify for subsidized individual coverage while the employee stays on the group plan.
• Consistency within classes. Contributions can differ between bona fide classes, such as full-time and part-time, but should be the same within a class. A self-funded or level-funded plan that favors highly paid employees can fail the Section 105(h) nondiscrimination test.

How each strategy behaves at renewal

A percentage strategy splits every renewal the same way it splits the premium. At 70% of every tier, a 10% renewal is a 10% increase for the employer and a 10% increase for every employee. At 70% of the employee-only rate, families take a larger share of the renewal than their share of the premium, because the employer's part is pinned to the smallest tier.

A flat amount puts the whole renewal on employees until the employer resets it. That is attractive to a CFO and visible to every employee on the first paycheck of the new plan year. If the client uses a flat amount, put a review of it on the renewal calendar so the reset is a decision rather than a reaction.

Our broker renewal calculator prices a renewal against today's share and a proposed one, which is the companion to this page when the client is changing strategy at renewal.

Taxes on the employee's share

The employer's contribution is excluded from the employee's income. The employee's share can be paid pre-tax too, but only through a Section 125 cafeteria plan, usually a simple premium-only plan document. Without one, employees pay their share with after-tax dollars, which makes a family's $1,495 cost noticeably more in take-home pay.

If the client doesn't have a premium-only plan, setting one up is the cheapest improvement available: it lowers payroll tax for the employer and income and payroll tax for employees on the same premium. Our Section 125 calculator estimates the difference.

Presenting the choice to a client

Clients usually arrive with a number in mind, a percentage someone told them was standard, rather than a strategy. Show them the three columns before they commit to one, and anchor the conversation on two employees: a single employee earning the company's lowest wage and an employee covering a family.

Ask what the company is trying to do with the plan. If it is recruiting experienced hires, family cost is the number candidates compare. If it is keeping a young team covered, the employee-only cost and participation matter most. If the CFO wants a fixed line in the budget, a flat amount does that, with the renewal risk passed to employees.

Write the strategy down in the plan's documents and the offer letters the same way. A strategy that exists only in a spreadsheet is hard to explain at the next renewal, and harder to change without employees feeling the change was hidden.

What this calculator leaves out

It prices one plan. If the client offers several plans, run it once per plan or use the premiums of the plan most employees choose. It assumes everyone stays in their tier; in practice a large rise in the family cost moves some families to a spouse's plan, which lowers the employer's cost and also the plan's participation.

It does not include an HSA or HRA contribution, which some employers pair with a lower premium contribution. Add those to the employer's cost separately when you compare.