The Internal Revenue Service building in Washington. Photo: Allison Bell/ALM
The Internal Revenue Service has increased an important health benefits parameter — the employee's "required contribution percentage" — to 9.96% for 2026, up from 9.02% for 2025.
Today, the federal Affordable Care Act requires some employers to offer employees affordable coverage with a minimum value or face the risk of owing penalties.
One way affected employers can use to show they offered employees affordable coverage is to hold the employee's share of the premiums for self-only coverage to an amount equal to the federal poverty level for an individual multiplied by the required contribution percentage.
This year, that means an employer can ask workers to pay $117.64 in most of the country and still use the "federal poverty level safe harbor," according to an analysis by Medcom Benefit Solutions.
Employers can use the current federal poverty level to calculate the safe harbor payment level for 2026, Medcom says.
The new 2026 required contribution percentage appears to increase the worker contribution limit based on the FPL safe harbor to $129.89, based on BenefitsPRO calculations.
The calculations would affect only the employee's share of the premium bill, not the total amount that the employee and the employer send to the coverage provider.
What it means: Employers using the FPL safe harbor can ask workers to pay more for coverage in 2026.
The percentage change may also affect how much employers that use health reimbursement arrangements in "cash for coverage" plans contribute to employees' qualified small employer HRAs.
For an ICHRA sponsor, the FPL safe harbor contribution amount is tied to the difference between the employee's safe harbor contribution amount and the cost of the second lowest-cost mid-tier, "silver level" policy available through the employee's Affordable Care Act public exchange.
Affordability: The federal Affordable Care Act exempts small employers from having to provide health coverage.
The applies "employer shared responsibility requirements" to "applicable large employers," or employers with 50 or more full-time employees and full-time equivalents, according to the IRS.
An applicable large employer may end up owing coverage affordability penalties if a full-time employee at the employer ends up qualifying for Affordable Care Act premium tax credit subsidies because the employer does not offer the employee affordable major medical coverage with a minimum value.
Related: IRS updates Affordable Care Act premium tax credit guide
The IRS has developed three safe harbors that employers can use in affordability calculations. One is based on the employee's actual rate of pay, one is based on Form W-2 wages and the third is the federal poverty level safe harbor.
The future: One question is how the administration of President Donald Trump will handle employer coverage affordability issues and related issues.
Up till now, the administration seems to have left most of the ACA rules and programs that affect employer health plans in place.
The administration could continue to take a restrained approach to making employer rule changes.
The administration could also wait to begin making ACA rule changes affecting employers until Daniel Aronowitz, the nominee to be the U.S. Labor Department assistant secretary in charge of the Employee Benefits Security Administration, or someone else is confirmed as the EBSA administrator.
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