The IRS has updated Affordable Care Act (ACA) affordability guidelines for 2026. Employer-sponsored health plans will be deemed affordable under the ACA’s “Pay-or-play” rules if employees pay no more than 9.96% of their household income for self-only coverage.
Under the ACA’s pay-or-play rules, applicable large employers (ALEs) must provide full-time employees with affordable, minimum-value health coverage or pay a penalty. Affordability means the employee’s cost does not exceed a set percentage of household income, adjusted annually.
For ACA pay-or-play compliance, the affordability calculation is based solely on the annual premium for self-only coverage, not family coverage. If multiple plan options are offered, affordability is measured using the lowest-cost plan that provides minimum value.
Since employers typically lack access to household income, the IRS allows ALEs to use the Form W-2, rate of pay, or federal poverty level safe harbors to determine affordability.
For 2026, the ACA affordability threshold rises to 9.96%. This marks the largest affordability increase to date, setting a new record for the ACA contribution percentage in 2026. As a result, employers may increase employee contributions for self-only coverage up to this limit and still meet the adjusted affordability percentage. Download the bulletin for more details.