ACA employer-mandate affordability — 2026 plan years
The Affordable Care Act employer mandate requires applicable large employers to offer affordable, minimum-value coverage. 'Affordable' means the lowest-cost employee-only contribution doesn't exceed an IRS-published percentage of an applicable wage figure. The percentage changes annually and is published by the IRS in a Revenue Procedure. Below: the rule, the three safe harbors, and a calculator.
The affordability rule, in one paragraph
Under IRC §4980H(b), an applicable large employer (generally 50+ full-time-equivalent employees) is subject to the “Penalty B” assessment for any month in which a full-time employee receives a premium tax credit because the employer's offer of self-only coverage was not affordable. An offer is affordable if the lowest-cost employee-only premium contribution for self-only coverage does not exceed the IRS- published affordability percentage of an applicable wage figure for that employee.
The percentage is set annually by the IRS via Revenue Procedure (typically released mid-summer of the prior year). Recent years: 9.12% (2023), 8.39% (2024), 9.02% (2025, set by Rev. Proc. 2024-35). The 2026 plan-year percentage is published in a separate Revenue Procedure; confirm against the current IRS notice on irs.gov before any benefits-design decision keys to it.
The three safe harbors for the wage figure
An employer can choose any of three safe harbors when applying the affordability test for any reasonable group of employees:
- W-2 box 1 wages. The employee's actual W-2 box 1 wages for the year. Most accurate to actual pay; the calculation can't be finalized until W-2s are issued.
- Rate of pay. Hourly employees: hourly rate × 130 hours × 12 months. Salaried: monthly salary × 12. Easy to apply during the plan year; conservative for high-bonus employees.
- Federal poverty line. Single-person FPL ÷ 12. Most conservative — produces the lowest maximum-affordable contribution. The safest harbor for an employer that wants a single-rate offer that's affordable for every employee regardless of wage.
Test your offer under the chosen safe harbor.
The IRS publishes the affordability percentage annually in a Revenue Procedure (typically released mid-summer of the prior year). The default value is the most recently verified IRS-published figure; confirm against the current Revenue Procedure on IRS.gov before any benefits-design decision.
The percentage drift matters more than people realize
A move from 8.39% (2024) to 9.02% (2025) means an employer that set the lowest-cost contribution at the FPL safe-harbor maximum for 2024 has more headroom in 2025. The opposite is also true: a year where the percentage drops compresses the maximum allowable contribution. Because plan years often start before the new year's Revenue Procedure publishes, the practical move is to set the contribution conservatively and adjust upward only after the IRS notice issues.
Plans whose lowest-cost contribution was set right at the FPL maximum in a prior year are also the plans most exposed when the percentage moves down. Penalty-B exposure runs $4,460/year (2024 inflation-adjusted) per affected employee receiving a premium tax credit, prorated by month — confirm the current-year rate on irs.gov.
What this guide doesn't cover (and why)
Penalty A — the much larger §4980H(a) exposure for failing to offer coverage to substantially all full-time employees — uses a different mechanic and is covered separately on the Penalty A vs B page (coming soon). Form 1094-C and 1095-C filing deadlines have their own page. Minimum-value testing (whether the offered plan covers at least 60% of expected total medical costs) is a separate inquiry from affordability.
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- IRS — Employer Shared Responsibility Provisions Q&A — Authoritative IRS Q&A on the §4980H employer mandate, including affordability mechanics.
- IRS Revenue Procedures — annual affordability percentage notices — The IRS publishes the affordability percentage each year in a Revenue Procedure (typically released mid-summer).
- HHS — 2025 Federal Poverty Guidelines (Federal Register) — Single-person FPL is one of the three safe-harbor wage figures; HHS updates annually.