ICHRA Affordability in 2026: What Employers Need to Know
The 2026 ACA affordability percentage is 9.96%. Here’s what that means for your contribution amount, what the safe harbors are, and how to avoid the §4980H penalty.
Every year, the IRS publishes the “ACA affordability percentage” — the threshold that determines whether an employer-offered health benefit counts as “affordable” under §4980H of the Internal Revenue Code. For 2026, that number is 9.96% (Rev. Proc. 2025-25).
For ICHRA-offering employers, hitting affordability matters because it’s how you avoid the §4980H(b) penalty when an employee goes to the marketplace. Here’s what you need to know.
What “affordable” actually means in 2026
An ICHRA contribution is “affordable” if the employee’s required monthly contribution for the lowest-cost silver plan in their area, after applying your ICHRA reimbursement, doesn’t exceed 9.96% of their monthly income.
Mathematically:
Example: an employee earns $5,000/month. The lowest-cost silver plan in their ZIP is $700/month. Your ICHRA contribution must be at least:
The three safe harbors
The IRS recognizes that employers don’t always know each employee’s actual household income. So they offer three “safe harbors” you can use instead — pick whichever is most favorable for your workforce:
- W-2 safe harbor.Use the employee’s prior-year W-2 Box 1 wages. Simple if your workforce is stable year over year.
- Rate of pay safe harbor. Use 130 hours × hourly rate for hourly employees, or monthly salary for salaried. Best for hourly-heavy workforces.
- Federal Poverty Line (FPL) safe harbor. Use the FPL for a single person ($15,650 in 2026). Most conservative — guarantees affordability for almost all workers.
Why this matters for setting your contribution
Your ICHRA contribution amount is your single biggest cost lever. Set it too low and you risk §4980H(b) penalties (currently $4,460 per affected employee per year, adjusted annually). Set it too high and you’re leaving savings on the table.
The right move: use a safe harbor that fits your workforce, set the contribution to comfortably hit affordability for the relevant cohort, and validate the math against actual lowest-cost-silver-plan premiums in each employee’s ZIP. The Eligo platform models all three safe harbors against real plan data when you build your program.
What changes for 2026 vs. prior years
The 2026 percentage of 9.96%is up from 9.02% in 2025 and 8.39% in 2024. The general trend has been upward (looser threshold). For most employers, this means you can contribute slightly less than last year and still hit affordability. Don’t cut your contribution mechanically — model it against actual plan rates first.
Bottom line
Affordability is a math problem with three inputs: your contribution, the lowest-cost silver plan in each employee’s area, and your chosen safe-harbor income basis. Get all three right and §4980H(b) goes away. Run a Quick Check to see the affordability math for your team — or talk to an Eligo advisor for the deep-dive analysis.