The Affordability Test
Employer coverage is affordable if the employee's required contribution for self-only coverage does not exceed the applicable percentage of the employee's household income. Because employers typically do not know employees' household income, the IRS provides three safe harbors.
| Safe Harbor | How It Works | Best For |
|---|---|---|
| W-2 wages safe harbor | Employee premium ≤ 9.96% of W-2 Box 1 wages (2026) | Most common; uses actual W-2 wages |
| Rate of pay safe harbor | Employee premium ≤ 9.96% of (hourly rate × 130 hours) or monthly salary | Hourly and salaried employees |
| Federal poverty level safe harbor | Employee premium ≤ 9.96% of federal poverty level for a single individual | Simplest; most conservative |
The Minimum Value Test
A plan provides minimum value if it pays at least 60% of the total allowed costs of benefits provided under the plan. The IRS provides a minimum value calculator that employers can use to determine whether their plan meets the 60% threshold. Most employer-sponsored plans easily meet the minimum value test.
2026 and 2027 Affordability Percentages
Compliance Note
The ACA affordability percentage is adjusted annually by the IRS. For 2026, the percentage is 9.96% (IRS Rev. Proc. 2025-15). For 2027, the percentage is 10.22% — this is the final percentage confirmed by IRS Rev. Proc. 2026-26. Use these exact percentages in your affordability calculations — do not use prior-year percentages.