If your organization is an Applicable Large Employer (ALE) — meaning you averaged 50 or more full-time + full-time equivalent employees in the previous calendar year — you must meet the IRS’s affordability requirements when offering an ICHRA to any full-time employee. These rules fall under the Affordable Care Act (ACA) Employer Shared Responsibility provisions.
Affordability ensures that employees are not required to spend too much of their household income on health coverage. As an ALE, your ICHRA must be considered affordable for full-time employees to avoid potential IRS penalties. Benafica will have worked with your team during the modeling stage to design your contribution strategy to be compliant for affordability metrics, so this article is for informational purposes.
How Affordability Is Calculated for ICHRA
The IRS determines affordability based on whether the employee contribution toward the lowest-cost Silver plan available in their area — minus your ICHRA allowance — exceeds a certain percentage of their income.
ICHRA is affordable if:
- Employee’s required premium contribution for the lowest-cost Silver plan ≤ the IRS affordability percentage
If it’s above that threshold, the offer is unaffordable.
Affordability Percentage
This percentage is updated annually by the IRS.
(Example: For 2026 coverage, the affordability threshold is 9.96%.)
What Happens if the ICHRA Is Unaffordable for an Employee?
If your ICHRA is considered unaffordable for a full-time employee:
- The employee may be eligible for Marketplace premium tax credits if they opt out of the ICHRA.
- Your organization may be subject to an ACA Employer Shared Responsibility penalty for that employee.
Offering an affordable ICHRA to all full-time employees helps maintain compliance and reduce liability.
Read our article about 2026 Affordability for ACA Plans.