The IRS released Revenue Procedure 2025-25 on July 18, 2025, which set the 2026 affordability safe harbor percentage for employer-provided medical coverage to 9.96%. This is an annually indexed amount and reflects a significant increase from 2025’s 9.02% safe harbor percentage. This affordability percentage affects both: (1) individuals’ eligibility for subsidies in the public health insurance marketplace, and (2) the employer affordability safe harbors used to avoid potential employer mandate penalties.
This alert is relevant for any applicable large employer, as defined under the Affordable Care Act (ACA), and provides a summary of: (i) the ACA’s employer mandate penalties, (ii) the three available employer affordability safe harbors, and (iii) a description of how the 9.96% affordability safe harbor percentage will affect setting employee contributions for the 2026 plan year.
