ACA Affordability Threshold Increases to 9.96% for 2026

Each year, the IRS updates a key benchmark that shapes the landscape of employer-sponsored health coverage.

Known as the ACA Affordability Threshold, this figure sets the minimum amount employers must contribute toward employee health insurance to stay compliant with the ACA Employer Mandate. It also determines whether employees may opt out and qualify for subsidies on the Health Insurance Marketplaces, such as Healthcare.gov or State-Based Exchanges like CoveredCA or Kynect.

2026 Update: What’s the New ACA Affordability Threshold?

For 2026, employer-sponsored health coverage is considered affordable if the employee’s required contribution for the lowest-cost self-only plan does not exceed 9.96% of their household income. That’s a slight increase from the 2025 threshold of 9.02%, meaning employers will need to contribute more to stay compliant.

Employers: What This Means for You

If your business employs 50 or more full-time equivalent (FTE) workers, the Affordable Care Act (ACA) requires you to offer Minimum Essential Coverage that meets affordability standards. Failing to do so can trigger costly penalties under the Employer Shared Responsibility Provisions (ESRP).

To stay compliant in 2026:

• Ensure your lowest-cost silver plan (self-only) costs no more than 9.96% of your employees’ household income.
  
  
• Use one of the IRS’s approved Safe Harbor methods—W-2 wages, rate of pay, or federal poverty line—to demonstrate affordability.
  
  
• Submit IRS Forms 1094-C and 1095-C accurately to report compliance.
  
  

For Employees: Know Your Rights

The ACA affordability threshold also protects employees by capping how much they can be expected to pay for employer-sponsored insurance.

If your required premium exceeds 9.96% of your household income, you may:

✅ Decline your employer’s plan

✅ Shop for a plan through Healthcare.gov or your state exchange

✅ Qualify for Advanced Premium Tax Credits (APTCs) that can lower your premium

This opens the door for employees to find better value and more flexible coverage in the individual market.

The Bottom Line

ACA affordability isn’t just a compliance requirement. It is a strategic lever to shape your benefits strategy, control costs, and support your workforce. With the 2026 threshold increasing, now is the perfect time to revisit your contribution levels and plan design.

Need a second opinion? Our team can provide a customized affordability analysis and help you fine-tune your ICHRA or group health offering to ensure compliance and maximize value in 2026.