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As 2026 moves forward, employers should review key Affordable Care Act (ACA) changes that may impact compliance — especially the updated ACA affordability percentage and potential Employer Shared Responsibility (pay-or-play) penalties.
2026 ACA Affordability Percentage & Why It Matters
The IRS has set the 2026 ACA affordability threshold at 9.96%.
So, what does that mean? Under the ACA, Applicable Large Employers (ALEs) must offer affordable, minimum-value (MV) health coverage to full-time employees or risk IRS penalties. Coverage is considered affordable if the employee’s required contribution for the lowest-cost, self-only plan does not exceed 9.96% of household income.
As employers don’t typically have access to employee household income, there are three IRS safe harbors that can be utilized to calculate affordability. These safe harbors (Form W-2, Rate of Pay, or Federal Poverty Line) help employers assess affordability by using readily available information rather than relying on household income.
Because the threshold changes annually, employers — particularly those with collective bargaining agreements or lower-wage employees — should carefully review contracts and employee contribution structures to maintain ACA compliance.
ACA Pay-or-Play Rules & Penalties
ALEs — employers with 50+ full-time employees (including full-time equivalents) — are subject to the ACA’s Employer Shared Responsibility requirements.
If at least one full-time employee receives a premium tax credit through a Health Insurance Marketplace (Exchange), the employer may be subject to penalties if it:
- Fails to offer coverage to at least 95% of full-time employees and dependents
- Fails to offer coverage to any full-time employee who receives an Exchange subsidy
- Offers coverage that is unaffordable or does not provide MV
Under Internal Revenue Code Section 4980H:
- Section 4980H(a) applies if an employer fails to offer MV coverage to at least 95% of full-time employees.
- 2026 adjusted penalty: $3,340/all full-time employees (excluding first 30)
- Section 4980H(b) applies if coverage is unaffordable, not offered, or does not provide MV.
- 2026 adjusted penalty: $5,010/affected full-time employee receiving an Exchange subsidy
What Employers Should Review Now
Proactive ACA compliance planning helps reduce risk of costly IRS penalties. Employers should:
- Recalculate affordability using the 2026 threshold
- Review employee contribution structures
- Review collective bargaining agreements
- Confirm MV plan design
- Analyze potential pay-or-play penalty exposure
- Ensure accurate Forms 1094-C and 1095-C reporting
Looking for help with ACA compliance? GKG’s got you covered.
ACA compliance isn’t just annual reporting — it’s strategic risk management. GKG’s ACA Services include:
- Collective bargaining agreement review
- ALE status analysis and workforce measurement
- IRS report completion & filing (Forms 1094-C & 1095-C)
- Ongoing monitoring and compliance support & strategy
- & more
If you’d like to evaluate your 2026 ACA compliance strategy, contact GKG’s ACA Advisors today.
Mike Grinnell
mgrinnell@gkgrisk.com
315.225.7895
Kirsten McBride
kirstenm@gkgrisk.com
315.761.9537