Selerix Compliance Corner Update! 

The IRS has released Rev. Proc. 2025-25, which outlines the inflation-adjusted affordability percentage for employer-sponsored coverage under the Affordable Care Act (ACA) for 2026. For plan years beginning in 2026, coverage will be considered “affordable” if the employee’s contribution for self-only coverage does not exceed 9.96% of household income—up significantly from 9.02% in 2025. 

This new affordability percentage will apply to employer shared responsibility provisions and premium tax credit eligibility for the 2026 plan year. The calculation is based on a premium growth measure introduced in the 2026 HHS Marketplace Integrity and Affordability Rule, which will be used moving forward. 

In addition, the IRS issued Rev. Proc. 2025-26, which provides the updated employer shared responsibility payment (ESRP) amounts for 2026. 

ACA Employer Mandate Remains in Effect 

Under the ACA, Applicable Large Employers (ALEs)—employers with 50 or more full-time equivalent employees in the prior calendar year—must offer affordable, minimum value coverage to their full-time employees or potentially face an ESRP. 

Coverage is deemed “affordable” if the employee’s cost for self-only coverage under the lowest-cost minimum value plan is less than 9.96% of household income in 2026. ALEs may determine affordability using one or more of the following IRS-approved safe harbors: 

• W-2 wages 

• Rate of pay 

• Federal Poverty Level (FPL) 

If coverage is unaffordable under these safe harbors and a full-time employee qualifies for a premium tax credit for Marketplace coverage, the employer may be liable for a penalty. 

Enforcement Is Active—and Aggressive 

While the individual mandate penalty for taxpayers remains $0 under the Tax Cuts and Jobs Act, the employer mandate continues to be enforced. The IRS actively audits ACA compliance using: 

• Letter 226J for employer shared responsibility payments (currently enforcing tax year 2023) 

• Letter 5699 for non-filers who have not submitted Forms 1094-C and 1095-C 

2026 FPL Safe Harbor Contribution Limit 

For employers using the FPL safe harbor, the maximum monthly employee contribution for self-only coverage in 2026 will be $129.89. This is calculated by multiplying the 2025 mainland FPL ($15,650) by 9.96%, then dividing by 12. 

While standard IRS rounding may apply (e.g., $129.90), a more conservative approach is to use $129.89 to ensure compliance. 

Next Steps for Employers 

With a nearly 1% increase in the affordability threshold, ALEs have more flexibility in setting employee contributions for 2026. To prepare: 

1. Review the updated 9.96% affordability percentage and how it impacts your plan design. 

2. Incorporate the new threshold into 2026 plan year contribution calculations—especially for non-calendar year plans, which must use the affordability percentage in effect at the start of the plan year. 

3. Ensure timely e-filing of Forms 1094-C and 1095-C for 2026. 

4. Verify prior year filings have been submitted and accepted by the IRS. Accepted filings will include a receipt ID, even if accepted with errors. 

Selerix Tip: Our solution automatically applies the correct affordability percentage based on your plan year; no guesswork required. Learn more about Selerix ACA solutions. 

Disclaimer: Selerix does not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this post is intended to provide a general overview of the topics and services contained herein. Selerix makes no representation or warranty as to the accuracy or completeness of the post and undertakes no obligation to update or revise the post based upon new information or future changes.