The Internal Revenue Service (IRS) has released Revenue Procedure 2025-25, which outlines the inflation-adjusted amounts for 2026 used to determine whether employer-sponsored health coverage is considered “affordable” under the Affordable Care Act (ACA). This applies to both the employer shared responsibility provisions (often called the employer mandate) and the premium tax credit program.
For plan years beginning in 2026, the affordability threshold is indexed to 9.96%—a notable increase from the 2025 rate of 9.02%. The U.S. Department of Health and Human Services (HHS) based this adjustment on a premium growth measure established in the 2026 HHS Marketplace Integrity and Affordability Rule. This measure will apply to benefit years going forward.
Additionally, the IRS released Revenue Procedure 2025-26, which includes the indexed penalty amounts for employer shared responsibility payments (ESRP) under Code Sections 4980H(a) and 4980H(b).
Employer Responsibilities Under the ACA
Applicable large employers (ALEs)—generally those with 50 or more full-time equivalent employees in the previous calendar year—must offer affordable, minimum value health coverage to their full-time employees to avoid potential penalties.
For 2026, coverage is considered affordable if an employee’s required contribution for self-only coverage under the employer’s lowest-cost minimum value plan does not exceed 9.96% of the employee’s household income. To help employers make this determination, the IRS provides three affordability safe harbors:
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W-2 Safe Harbor
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Rate of Pay Safe Harbor
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Federal Poverty Line Safe Harbor
ALEs should review their contribution strategy to ensure compliance with the updated affordability threshold and penalty calculations.
About the Author: This alert was prepared for [Agency] by Barrow Lent LLP, a national law firm with recognized expertise in ERISA and the ACA. For questions, contact Stacy Barrow () or Nicole Quinn-Gato ().
This article is intended for general informational purposes only and should not be construed as legal advice. Readers are encouraged to consult qualified legal counsel for guidance specific to their situation. © 2025 Barrow Lent LLP. All Rights Reserved.