The IRS has announced the 2026 Affordable Care Act (ACA) affordability threshold: 9.96% of household income, up from 9.02% in 2025 and the highest to date. But what does this mean for employers, especially those offering Individual Coverage Health Reimbursement Arrangement (ICHRA) plans? Let’s take a closer look.

ACA Employer Mandate & Affordability Requirements: Quick Recap

Under the ACA’s Employer Shared Responsibility Provisions (Employer Mandate), Applicable Large Employers (generally those with 50+ full-time and full-time equivalent employees) must offer coverage that is:

• Minimum Essential Coverage (MEC): Basic health coverage that meets ACA standards.
• Affordable: Based on IRS-set percentage thresholds of household income.
• Value (MV): Plan covers at least 60% of expected costs.

Failing to comply can trigger significant penalties. Because employers often can’t know household income, the ACA provides three safe harbor options to test affordability:

1. Federal Poverty Line (FPL) compares employee contribution against the FPL for a single-person household.
2. Rate of Pay calculates the employee’s hourly rate x 130 hours/month or monthly salary.
3. W-2 Form uses the employee’s W-2 Box 1 wages.

Example

For plan years starting in 2026, an offer will be considered affordable if the employee’s cost for self-only coverage doesn’t exceed 9.96% of the safe harbor amount. Here’s an example of how this calculation works using the Rate of Pay safe harbor option for a full-time hourly employee earning $20/hour:

• $20 x 130 hours = $2,600/month.
• 9.96% x $2,600 = $258.96/month max the employee can be required to pay for self-only coverage.

For ICHRAs, the employer’s monthly contribution must be enough so the net cost of the lowest-cost silver plan (based on ACA marketplace plans for each employee’s age and zip code) is affordable under the chosen safe harbor.

What the 2026 Affordability Increase Means For You

The 9.96% threshold means employers can require employees to pay a larger share of premium costs while still satisfying ACA affordability requirements. This has different impacts depending on the type of plan you offer:

• Traditional Group Health Plans: Employers can lower their premium contributions and remain compliant — but risk creating financial strain for employees, potentially reducing plan participation or satisfaction.
• ICHRA Plans: Employers fund pre-tax accounts for employees to purchase individual health insurance. The affordability threshold determines how much the employer must contribute so the employee can afford a lowest-cost silver plan on the exchange, after applying safe harbor rules.

We’ve guided our clients through the affordability testing process to ensure they’re fully prepared and compliant for 2026. For employers planning ahead, here are key considerations to keep in mind.

• Model 2026 contributions under each safe harbor.
• Track marketplace plan rates, especially the lowest-cost silver plan.
• Evaluate budget vs. employee impact — don’t just meet the minimum.
• Consider ICHRA plans to provide more flexibility — ICHRA plans let employers:
• Control costs through defined contributions.
• Offer employee choice — increased autonomy for employees to choose their preferred healthcare plans from across the health exchanges.
• Adapt to diverse workforce needs — but compliance hinges on careful affordability strategy.

How Decisely Can Help

With rising thresholds and complex rules, employers need a trusted advisor who can:

• Provide safe harbor testing and affordability modeling.
• Guide benefits strategy that balances compliance, cost, and employee well-being.
• Keep you ahead of regulatory changes — not scrambling after them.

Final Takeaway

The 2026 affordability threshold brings both cost-saving opportunities and risks. Partnering with the right advisor ensures your health benefits stay compliant, competitive, and valuable to your teams.