IRS raises affordability threshold for 2026

Employers averaging 50-plus full-time equivalent employees in the prior calendar year are deemed applicable large employers and are subject to Affordable Care Act (ACA) affordability requirements. The IRS sets a threshold to determine the affordability of employer-sponsored health coverage and premium tax credit (PTC) eligibility. The affordability rate for the 2026 plan year is set at 9.96% of total annual household income, an increase from the 2025 limit of 9.02%.

Failure to provide benefit-eligible employees with an affordable, minimum value health coverage option can result in employer shared responsibility penalties pursuant to IRS guidelines. Lower-income employees who are not offered satisfactory coverage may be eligible for a PTC through Healthcare.gov.

The affordability threshold applies on a plan-year basis, not the calendar year. Non-calendar plans year should continue using the 9.02% rate until the 2026 plan renewal.

*Maximum an employee could pay for employer-sponsored, self-only coverage using the FPL affordability safe harbor. Employers may also adopt the rate-of-pay or W-2 affordability safe harbors.