ACA Compliance in 2026: The Affordability Threshold Just Changed

What Changed for 2026

Every year the IRS adjusts the ACA affordability percentage based on premium growth. For plan years beginning in 2026, the threshold jumped from 9.02% to 9.96% — the largest single-year increase since the ACA was enacted.

This means an employee earning $40,000 annually could now pay up to $332/month for self-only coverage before it's considered "unaffordable" under the ACA — compared to $301/month under the 2025 threshold.

Who This Affects

• Applicable Large Employers (ALEs) — any employer with 50+ full-time employees (including full-time equivalents) during the prior calendar year
• HR and benefits administrators who manage health plan offerings and compliance reporting
• Employees at ALEs who may see changes in employer-sponsored health plan pricing

The 3 ACA Safe Harbors (Still in Effect)

Employers can use any of these three safe harbors to demonstrate affordability — you don't need to know actual household income:

1. W-2 Safe Harbor

The employee's required contribution must not exceed 9.96% of their W-2 Box 1 wages. This is the most common method.

2. Rate of Pay Safe Harbor

The contribution must not exceed 9.96% of 130 monthly hours × the employee's hourly rate (or monthly salary for salaried employees). Best for industries with variable hours.

3. Federal Poverty Line (FPL) Safe Harbor

The contribution must not exceed 9.96% of the federal poverty line for a single individual, divided by 12. For 2026, this means the maximum monthly employee cost is approximately $131/month. This is the simplest method and works for all employees regardless of income.

2026 ACA Reporting Timeline

How iSolved Handles ACA Compliance

Specifically, iSolved handles:

• Full-time employee tracking: Automatically tracks hours across all employee types and flags those approaching ALE thresholds
• Affordability calculations: All three safe harbors are built in — W-2, Rate of Pay, and FPL — updated annually with the new IRS threshold
• 1094-C/1095-C generation: Forms are auto-populated from your existing payroll and benefits data — no duplicate entry
• Electronic IRS filing: File directly through iSolved's integrated e-filing system
• Employee distribution: 1095-C forms available to employees via iSolved self-service portal
• Audit trail: Complete documentation for IRS penalty response letters (226-J notices)

FAQ

What is the ACA affordability threshold for 2026?

The ACA affordability threshold for 2026 is 9.96% of an employee's household income. This means the employer's lowest-cost self-only health plan premium must not exceed 9.96% of the employee's household income to be considered affordable. This is an increase from 9.02% in 2025.

Who is considered an Applicable Large Employer (ALE) under the ACA?

An Applicable Large Employer (ALE) is any employer that had an average of 50 or more full-time employees (including full-time equivalents) during the prior calendar year. ALEs are required to offer affordable minimum essential coverage to at least 95% of their full-time employees or face potential penalties.

What are the ACA reporting deadlines for 2026?

For the 2025 tax year (reported in 2026): Forms 1095-C must be furnished to employees by March 3, 2026. Electronic filing of Forms 1094-C and 1095-C with the IRS is due by March 31, 2026. For the 2026 tax year: employers should begin tracking in January 2026 using the new 9.96% affordability threshold.