{"id":10811,"date":"2024-09-16T14:01:39","date_gmt":"2024-09-16T19:01:39","guid":{"rendered":"https:\/\/www.bbrown.com\/?post_type=insight&#038;p=10811"},"modified":"2026-02-04T14:22:23","modified_gmt":"2026-02-04T20:22:23","slug":"affordability-alert","status":"publish","type":"insight","link":"https:\/\/www.bbrown.com\/us\/insight\/affordability-alert\/","title":{"rendered":"Affordability Alert \u2013 Indexed Contribution Percentage for an Employer\u2019s Plan Under the ACA"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column]\n\t<div class=\"hero hero--wrap    \">\n\n\t\t<div class=\"hero--background-image bg-brand-dark-blue bg-overlay\">\n\t\t\t<div class=\"hero--overlay\"><\/div>\n\t\t\t\t\t\t\t<div class=\"hero-background\" style=\"background: url(https:\/\/www.bbrown.com\/wp-content\/uploads\/2024\/09\/AdobeStock_649204885-scaled.jpeg) center center no-repeat; background-size: cover;\"><\/div>\n\t\t\t\t\t<\/div>\n\n\t\t<div class=\"hero--container\">\n\t\t\t<div class=\"container\">\n\t\t\t\t<div class=\"hero--inner width-100\">\n\n\t\t\t\t\t\n  <div class='content-heading  100%  '>\n    <p class='text-white subheading'>Employee Benefits<\/p>\n    <h1 class='text-white    '>\n      Affordability Alert \u2013 Indexed Contribution Percentage for an Employer\u2019s Plan Under the ACA\n    <\/h1>\n\t\n  <\/div>\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\n\t<\/div>\n\n\t\n[\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;]\n  <div class='content-heading  100% content-heading--ruled '>\n    \n    <h1 class='text-brand-dark-blue    h2'>\n      Affordability Alert \u2013 Indexed Contribution Percentage for an Employer\u2019s Plan Under the ACA\n    <\/h1>\n\t\n  <\/div>[vc_column_text css=&#8221;&#8221;]On July 18, 2025, the IRS issued <a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/rp-25-25.pdf\" target=\"_blank\" rel=\"noopener\">Revenue Procedure 2025-25<\/a>, announcing the indexed contribution percentage applicable in 2026 for determining the affordability of an employer\u2019s plan under the Affordable Care Act (ACA).<\/p>\n<p>For plan years beginning in 2026, employer-sponsored coverage will be considered affordable for purposes of the employer shared responsibility penalties (ESRP) if the employee\u2019s required contribution for self-only coverage under the lowest-cost medical plan option that provides minimum value (MV) does not exceed:<\/p>\n<ul>\n<li>9.96% of the employee\u2019s household income for the year (an increase from the affordability contribution percentage of 9.02% in 2025).<\/li>\n<\/ul>\n<p>The updated affordability percentages are effective for taxable and plan years beginning January 1, 2026.<\/p>\n<p>Because employers will not know each employee\u2019s household income to determine whether the offer of coverage is affordable, optional safe harbors may be adopted. The applicable safe harbors include:<\/p>\n<ul>\n<li><strong>The Box 1 W-2 Safe Harbor:<\/strong> Under this safe harbor, the offer is affordable if the employee\u2019s contribution for the lowest -cost employee-only coverage option does not exceed the applicable percentage of the employee\u2019s Box 1 W-2 earnings.<\/li>\n<li><strong>The Rate of Pay Safe Harbor:<\/strong> This applies the percentage to the employee\u2019s base hourly rate of pay at 130 hours a month or the monthly salary of a salaried employee.<\/li>\n<li><strong>The Federal Poverty Level (FPL) Safe Harbor:<\/strong> This applies the affordability percentage to the mainland (or Hawaii\/Alaska, if applicable) federal poverty line that is in effect within six (6) months before the start of the plan year.\n<ul>\n<li>The 2025 federal poverty line amount was $15,650. Accordingly, for plan years beginning on January 1, 2026, an Applicable Large Employer would be considered as offering affordable coverage under the federal poverty line safe harbor if it offers full-time employees self-only coverage in its lowest cost, MV plan with an employee contribution of no greater than $129.90 per month ($15,650 \u00f7 12 X 9.96% = $129.90).<sup>1<\/sup><\/li>\n<li>For 2026 plan years beginning on or after January 15, 2026, an Applicable Large Employer may utilize the higher 2026 federal poverty line amount of $15,960. Accordingly, an Applicable Large Employer in this situation would be considered to be offering affordable coverage under the federal poverty line safe harbor if it offers full-time employees self-only coverage in its lowest cost, MV plan with an employee contribution of no greater than $132.47 a month ($15,960 \u00f7 12 X 9.96% = $132.47).<sup>2<\/sup><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>[\/vc_column_text][vc_column_text css=&#8221;&#8221;]<\/p>\n<h6 style=\"font-size: 11px; text-transform: none; padding-bottom: 5px;\"><em><sup>1<\/sup> A different calculation applies with respect to employees residing in Alaska or Hawaii.<br \/>\n<\/em><em><sup>2<\/sup> A different calculation applies with respect to employees residing in Alaska or Hawaii.<\/em><\/h6>\n<p>[\/vc_column_text]\t<div class='wpb_content_element text-left btn-container'>\n\t\t\t\t\t<a class='btn btn-brand-green  '\n\t\t\t\thref='https:\/\/www.bbrown.com\/wp-content\/uploads\/2026\/02\/Affordability-Alert-2026-Brown-Brown-1.pdf' target='_blank' data-toggle=''>\n\t\t\t\t<span class=\"btn-text-color--default\">Download PDF<\/span>\n\t\t\t<\/a>\n\t\t\t<\/div>\n[\/vc_column][vc_column width=&#8221;1\/3&#8243;][vc_single_image image=&#8221;2348&#8243; alignment=&#8221;center&#8221; style=&#8221;vc_box_circle_2&#8243;][vc_separator border_width=&#8221;2&#8243; el_width=&#8221;60&#8243;][vc_column_text css=&#8221;&#8221;]<\/p>\n<h6 style=\"text-align: center;\">Regulatory &amp; Legislative Strategy Group<\/h6>\n<p>[\/vc_column_text]\t<div class='wpb_content_element text-center btn-container'>\n\t\t\t\t\t<a class='btn btn-brand-dark-blue  '\n\t\t\t\thref='\/us\/contact\/contact-general\/' target='' data-toggle=''>\n\t\t\t\t<span class=\"btn-text-color--default\">Connect Now<\/span>\n\t\t\t<\/a>\n\t\t\t<\/div>\n[\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;][vc_column_text css=&#8221;&#8221;]On July 18, 2025, the IRS issued Revenue Procedure 2025-25, announcing the indexed contribution percentage applicable in 2026 for determining the affordability of an employer\u2019s plan [&hellip;]<\/p>\n","protected":false},"author":66,"featured_media":10812,"template":"","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"insight_category":[31,73],"class_list":["post-10811","insight","type-insight","status-publish","has-post-thumbnail","hentry","insight_category-employee-benefits","insight_category-regulatory-and-legislative-strategy"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.0 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Affordability Alert \u2013 Indexed Contribution Percentage for an Employer\u2019s Plan Under the ACA - Brown &amp; Brown<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bbrown.com\/us\/insight\/affordability-alert\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Affordability Alert \u2013 Indexed Contribution Percentage for an Employer\u2019s Plan Under the ACA\" \/>\n<meta property=\"og:description\" content=\"[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;][vc_column_text css=&#8221;&#8221;]On July 18, 2025, the IRS issued Revenue Procedure 2025-25, announcing the indexed contribution percentage applicable in 2026 for determining the affordability of an employer\u2019s plan [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.bbrown.com\/us\/insight\/affordability-alert\/\" \/>\n<meta property=\"og:site_name\" content=\"Brown &amp; 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