The IRS recently issued Revenue Procedures 2025-25 and 2025-26 announcing the 2026 affordability threshold (contribution percentage) for employer-sponsored health plans and adjusted shared responsibility penalty amounts under the Affordable Care Act (ACA).   

Background: 

Under the ACA, applicable large employers (ALEs) – those with 50 or more full-time equivalent employees – must offer minimum essential coverage to their full-time employees that is affordable and provides minimum value.  ALEs that do not meet these requirements may owe an employer shared responsibility penalty.   

• A full-time employee (FTE) is defined as one who works (or is expected to work) at least 30 hours per week (or 130 hours per month). 

The affordability threshold and the shared responsibility penalty amounts may be adjusted annually by the IRS for inflation. 

2026 Affordability Threshold: 

For plan years beginning in 2026, coverage will be considered affordable if the employee’s required contribution for self-only coverage under the lowest-cost, minimum value plan option does not exceed 9.96% of their household income for the calendar year.  This is a significant increase from 9.02% in 2025. 

Because employers generally do not know employees’ household income, the following safe harbor options may be used instead: 

• Box 1, W-2: The employee’s Box 1, W-2 earnings × 9.96% 

• Rate of Pay: The employee’s base hourly rate (hourly employees) x 130 hours x 9.96% or (salaried employees) monthly salary ÷ 12 × 9.96% 

• Federal Poverty Level (FPL): FPL amount in effect within 6 months before the start of the plan year x 9.96% 

• For 2025, the PFL is $15,650. For plan years beginning on January 1, 2026, coverage will be affordable under this safe harbor if the employee contribution does not exceed $129.89 per month ($15,650 ÷ 12 × 9.96%). 

• The 2026 PFL has not been released. 

2026 Employer Shared Responsibility Penalties: 

Under IRC 4980H(a) and (b), ALEs may be required to pay a shared responsibility penalty if they do not offer coverage to at least 95% of FTEs or if the coverage does not meet affordability or minimum value requirements. These payment amounts are sometimes referred to as the “(a) penalty” and the “(b) penalty”. 

Subsection (a) Penalty:  $3,340 

• $278.33 per month per FTE, excluding the first 30 FTEs (up from $241.67 per month in 2025). 

• This penalty applies if coverage is not offered to substantially all (95%) full-time employees, and one full-time employee that is not offered coverage receives a Premium Tax Credit (PTC) for Exchange coverage. 

Subsection (b) Penalty: $5,010 

• $417.50 per month for each FTE that receives a PTC for Exchange coverage (up from $362.40 per month in 2025). 

• This penalty applies if the employer meets the 95% coverage requirement, but the coverage offered did not meet affordability and minimum value requirements or an FTE was not offered coverage and received a PTC.  

The IRS uses Letter 226-J to notify ALEs if a shared responsibility penalty may be owed.  Employers generally have 90 days from the date of Letter 226-J to respond but should work with their legal counsel and advisors to respond as promptly as possible if such a letter is received. 

Your Piper Jordan account team is available to answer any questions and assist in reviewing 2026 health plan offerings and contribution structures to ensure they meet the updated affordability threshold.  

Additional Information: 

More information about these provisions is available at:  Affordable Care Act – Employer Information Page