Affordable is a number, not a judgment.
At 50 or more full-time equivalents you must offer coverage that clears a specific percentage. That percentage moves every year, which means a contribution that passed last year can fail this one without anybody changing anything. Test it against all three safe harbors here.
Pick a harbor and enter two numbers.
The inputs change with the harbor, because each one measures a different thing.
The percentage is set by the IRS each year: 9.96 percent for 2026, 10.22 percent for 2027.
The employee share, not the full premium, and it must be a plan that meets minimum value.
The mainland figure for a single individual. A calendar-year 2026 plan uses the 2025 guideline of 15,650 dollars. Update it for a later year.
The lowest hourly rate among the employees you are testing, as of the first day of coverage. Multiplied by 130 hours.
Only known after the year ends, which is why this harbor is the hardest to rely on prospectively.
Affordability Test
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against the safe harbor you selected
Affordability is measured against the employee cost for the lowest-priced self-only option that meets minimum value. The statute nominally measures household income, which no employer can know, which is why the safe harbors exist. General information, not tax advice.
Next, test how you split the premium
Affordability depends on what the company pays toward the employee-only tier. Test three ways to split the premium and see what each costs you a year.
Why there are three, and which to use.
Federal Poverty Line
One number for the entire workforce, which makes it far and away the simplest to run. It is also the strictest, because it ignores what anyone actually earns. A calendar-year 2026 plan uses the 2025 guideline of 15,650 dollars, which caps the employee contribution at about 129.89 dollars a month.
Rate of Pay
The hourly rate as of the first day of coverage, multiplied by 130 hours, or monthly salary for salaried staff. Usable prospectively, which is its main advantage, and it flexes with what people are paid rather than assuming the worst case.
Form W-2
Box 1 wages for the year. Accurate, and close to useless for planning, because Box 1 is not known until the year has ended. Employers setting contributions in advance generally cannot rely on it. Rate of pay and the federal poverty line are the two safe harbors that can be tested before the year starts.
The penalty is not for having no plan.
It Is Triggered by One Employee
An employee offered coverage that is not affordable may go to the exchange instead. If they receive a premium tax credit there, the penalty is assessed per employee, per month. An otherwise healthy benefits program can generate a bill because one contribution tier sits a few dollars the wrong side of a percentage.
And It Moves Every Year
9.96 percent for plan years beginning in 2026, 10.22 percent for 2027. The direction is not always the same, and a plan set against last year figure with no headroom is a plan that fails quietly. Test at every renewal, not once.
Federal requirements only. General information for planning, not tax or legal advice on your specific plan. See the full benefits compliance calendar or run the deadline checker.
What employers ask about ACA affordability.
The four that decide whether your offer actually counts.
What is the ACA affordability percentage for 2026?
9.96 percent for plan years beginning in 2026, and 10.22 percent for plan years beginning in 2027. The figure is reset by the IRS every year and it does not always move in the same direction, which is why a contribution that cleared the line one year can fail it the next with nothing else having changed.
How do you calculate ACA affordability?
You measure the employee cost for your lowest-priced self-only option that meets minimum value against one of three safe harbors. Under the federal poverty line harbor, a calendar-year 2026 plan uses the 2025 guideline of 15,650 dollars, giving a maximum employee contribution of about 129.89 dollars a month. Under rate of pay it is the hourly rate multiplied by 130 hours, or monthly salary for salaried staff. Under the Form W-2 harbor it is Box 1 wages divided across twelve months.
What are the three ACA affordability safe harbors?
Federal poverty line, rate of pay and Form W-2. The statute nominally measures household income, which no employer can know, so the safe harbors exist to give you something you can actually calculate. The poverty line harbor is the simplest because it produces one number for the whole workforce, and also the strictest because it ignores what anyone earns. The W-2 harbor is the most accurate and the least usable in advance, since Box 1 is not known until the year has ended.
What happens if our coverage is not affordable?
An employee offered coverage that fails the test may go to the exchange instead, and if they receive a premium tax credit there a penalty is assessed per employee, per month. The trigger is the affordability failure, not the absence of an offer, which is why an otherwise sound benefits program can generate a bill because one contribution tier sits a few dollars the wrong side of a percentage.
ACA reporting, done properly → · Renewal and funding strategy → · Estimate the penalty in dollars →
Related Guides
Related reading: Michigan minimum wage and benefits · Opt-Out Payments and ACA Affordability · ACA Affordability Safe Harbors Explained
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Check affordability against your actual plan.
Send us your renewal and census and we will test your contribution strategy against the affordability percentage.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
26 U.S.C. § 36B(c)(2)(C) — Affordability of employer-sponsored coverage
26 U.S.C. § 4980H — Employer shared responsibility payments for applicable large employers
26 CFR 54.4980H-5(e)(2) — Affordability safe harbors
Rev. Proc. 2025-25 — 2026 required contribution percentage of 9.96 percent
Rev. Proc. 2026-26 — 2027 required contribution percentage of 10.22 percent
This tool gives estimates for education, not tax or legal advice. Rules change, so confirm your situation with a qualified advisor.
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