When employers offer employees a cash payment to opt out of medical coverage, how does the potential opt-out payment affect the affordability calculation under the ACA? Including the potential opt-out payment in the affordability calculation works against the employer’s interest. On July 8, the IRS issued proposed regulations that clarify that only “eligible” opt-out payments may be excluded from the affordability calculation. To qualify as eligible, the opt-out payment should be conditioned upon (1) an employee declining enrollment in the employer coverage and (2) the employee providing “reasonable evidence” that he or she (and dependents) will have minimum essential coverage for the period that the employee is declining coverage. The alternative source of coverage must not be an individual policy and the employer may not pay the opt-out payment if it has knowledge that coverage has not actually been ascertained by the employee or dependent.