On July 18, 2025, the IRS published Revenue Procedure 2025-25, which announces the ACA affordability percentage (termed the required contribution percentage) for medical plan years beginning in 2026.
Under the ACA employer-shared responsibility rules (also known as the employer mandate), an applicable large employer (ALE) must provide affordable, minimum-value coverage to its full-time employees or risk being subject to penalties (An ALE is an employer that employed at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year). The required contribution percentage is used to determine whether an employer-sponsored health plan offers affordable coverage. This affordability percentage is adjusted for inflation each year.
In 2026, the ACA's affordability percentage will increase from 9.02% to 9.96%. For the employer mandate and affordability, this means that an employee’s required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.96% of the federal poverty line (FPL) or of an employee’s W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon). If an employer offers multiple healthcare coverage plan options, the affordability test applies to the lowest-cost option that also meets minimum value. For calendar year plans, the maximum employee cost-share for the lowest-cost self-only coverage that will satisfy the FPL affordability safe harbor will increase from $113.20 to $129.89/month (mainland U.S.) for plan years that begin in 2026. Higher monthly cost-share amounts may be available under the rate of pay and Form W-2 safe harbors, which rely on actual earnings.
If the employer offers a non-calendar year plan, the employer will use the affordability contribution percentage in effect at the beginning of the non-calendar year plan. For example, if a plan year begins on November 1, 2025, the applicable affordability percentage for that entire plan year is 9.02%. The employer will begin to use 9.96% on November 1, 2026, for the following non-calendar plan year. The maximum cost-share to satisfy the FPL affordability safe harbor may differ for certain non-calendar-year plans that use the 2026 FPL (typically released in January or February) to calculate this amount.
The guidance also includes the 2026 premium tax credit (PTC) table used to determine an individual’s eligibility for a PTC, and if eligible, the maximum amount the individual must pay for their premiums, with the remainder covered by the PTC. Employees who are offered affordable minimum value coverage by their employers are not eligible for a PTC.
Employer Takeaway
Employers should be aware of the 2026 affordability percentage increase, which they will need to factor into their determination of full-time employee premium contribution rates for the plan year beginning in 2026. ALEs that fail to satisfy the new affordability threshold may be subject to potential employer-shared responsibility penalties. For the updated penalty amounts, please see the article, IRS Releases 2026 ACA Employer Mandate Penalty Amounts, in this edition of Compliance Corner. For further information on the affordability requirements, please ask your broker or consultant for a copy of the NFP publications ACA: Employer Mandate Penalties and Affordability and Cost-Share Contribution Models: A Guide for Employers.
A copy of the Revenue Procedure is available at IRS Rev. Proc. 2025-25.