ACA Affordability Threshold Increase

The IRS has increased the ACA affordability threshold to 9.96%. Here’s what that means for you.

I’ve been in this business for over 30 years, and I still read every new IRS revenue procedure as soon as it’s released. It’s not because I enjoy paperwork, but because a single number hidden in a government notice can end up costing a client thousands if it’s missed.

This year, the number is 9.96%. That’s the new ACA affordability threshold for the 2026 plan year, up from 9.02% in 2025. It’s the highest so far, and if you manage HR or benefits for a business with 50 or more full-time employees, it’s worth taking a few minutes to review this before open enrollment.

So What Actually Changed?

Under the ACA’s employer mandate, larger employers must offer full-time employees health coverage that meets two requirements: it must provide minimum value, and it must be “affordable.” Affordability is measured by what the IRS calls the required contribution, which is what your employee pays out of pocket for the lowest-cost, self-only plan you offer. Each year, the IRS updates the percentage of income that this contribution can reach.

For 2026, the percentage increased from 9.02% to 9.96%. At first, this might seem helpful, since a higher percentage gives you a bit more flexibility before facing penalties. However, the IRS also raised the penalties for 2026. The “A Penalty” is now $3,340 per employee, and the “B Penalty” is $5,010. If you make mistakes in your calculations, even for a few employees, the costs can add up quickly.

The Three Safe Harbors, in Plain English

Because employers do not have access to an employee’s total household income, the IRS provides three approved methods to test affordability. I review all three with clients each year:

• The Form W-2 Safe Harbor. Your employee’s contribution can’t exceed 9.96% of what shows up in Box 1 of their W-2.
• The Rate of Pay Safe Harbor. This one is based on the hourly rate multiplied by 130 hours a month, or the monthly salary for salaried folks.
• The Federal Poverty Line (FPL) Safe Harbor is the option most of my clients choose because it is simple and consistent. For 2026, the maximum monthly contribution under this safe harbor is about $129.89 for the mainland U.S.

Many businesses use the FPL safe harbor because it is easy to apply across the board. However, the simplest option is not always the most cost-effective. Depending on your wage structure and plan design, one of the other two methods might save you money while still compliant. It’s best to review your options before finalizing contributions.

Three Things I’d Ask You to Check Right Now

1. Check last year’s numbers using the new threshold. A contribution that met the requirements in 2025 might not meet the 9.96% limit this year, especially if pay rates changed or you added a new plan tier.
2. Confirm that your compliance team is using the 2026 figures. I have seen businesses face problems because their software or broker was still using last year’s percentages. This is an easily avoidable issue with the IRS.
3. Communicate with your employees. Make sure they know which plan is your lowest-cost option and how their share is calculated. If there is confusion, it can create compliance risks and lead to difficult conversations during renewal.

You Shouldn’t Have to Figure This Out Alone

This is the type of work my team and I handle for small and mid-sized employers in Blue Bell, Philadelphia, and nearby areas. We meet with your HR team or office staff, review your plan’s numbers, and identify issues before they turn into penalties. I have been doing this for 30 years, and it remains just as important today.

If you are not completely sure your 2026 contributions meet the affordability test, we can review them together. Contact Goldmark Benefits, and we will take a look.

Mark Goldstein
Goldmark Benefits

This article is meant for general information and isn’t legal or tax advice. Please talk to your own tax or legal advisor about your specific situation.