For plan years beginning in 2027, the required contribution percentage is 10.22%. For plan years beginning in 2026, it is 9.96%. The change does not establish a universal employer allowance or make a particular provider the right choice.
Start with the plan year
IRS Revenue Procedure 2026-26 sets the 2027 percentage and its effective period. A calendar-year label matters: planning during 2026 for coverage that begins in 2027 is different from applying a rule to a plan year that began in 2026. Keep both versions in your records, rather than overwriting last year's assumptions.
| Plan year begins in | Percentage | IRS reference |
|---|---|---|
| 2026 | 9.96% | Revenue Procedure 2025-25 |
| 2027 | 10.22% | Revenue Procedure 2026-26 |
A worked example, with visible assumptions
For Marketplace affordability, the reference is generally the employee's self-only lowest-cost Silver premium, reduced by the monthly ICHRA amount, compared with the applicable share of household income. Use the employee's actual circumstances and the governing rules. A selected plan's price is not necessarily the reference premium.
Illustration only: assume a $600 monthly reference premium, $50,000 annual household income, a $200 monthly allowance, and a plan year beginning in 2027. The reference cost after the allowance is $400 per month. The income-based comparison is $50,000 × 0.1022 ÷ 12, or approximately $425.83 per month. Under these simplified assumptions, $400 falls below that comparison amount.
Change the reference premium to $700 while holding the other inputs constant, and the residual becomes $500. That exceeds $425.83. The example explains why the same employer allowance can produce different employee results. These invented numbers are not a quote, benchmark, personalized eligibility determination, or claim about what employers typically contribute.
Separate affordability from the coverage decision
An ICHRA offer affects access to Marketplace premium tax credits. An affordable offer generally prevents those credits even if the employee declines it. When an offer is unaffordable, an employee generally must opt out of the ICHRA to seek a premium tax credit and must meet the other eligibility conditions. Follow the Marketplace's application process for the actual determination.
Affordability does not answer every plan-shopping question. Write down the doctors, prescriptions, service areas, and anticipated out-of-pocket costs you need to compare. Ask for clarification when the employer's reference calculation and your chosen policy show different prices. Keep the offer notice and the information used in your application.
Build a reviewable contribution decision
Employers evaluating employer-mandate obligations need a separate analysis of applicable rules and permitted safe harbors. Do not substitute payroll wages for household income in an employee's Marketplace calculation merely because wages are easier to obtain. A percentage alone does not resolve classes, notice, eligibility, plan availability, or administration.
- Record the intended effective date and select the corresponding plan-year rule.
- Have the adviser identify the correct reference premiums and the permitted basis for the employer's analysis.
- Compare candidate allowances with employee-level results and the budget, including administrative fees.
- Document unresolved cases and assign responsibility for explaining them before enrollment.
- Retain the inputs, sources, and decision date so the analysis can be reproduced at renewal.
Does affordable mean the same thing to employees and employers?
No. Keep three questions separate: the employee’s Marketplace premium-tax-credit test, the employer’s section 4980H affordability analysis, and whether the chosen coverage fits the employee’s budget. The first two are legal analyses; the third also includes doctors, prescriptions and costs when receiving care. source source source
Fictional 2027 example, not a quote or a personal eligibility result. Assume a full-year ICHRA offer to a current, full-time hourly employee of an applicable large employer; a plan year beginning January 1, 2027; $48,000 annual household income; and a constant $20 hourly rate. The employer meets the prerequisites for using an income safe harbor and applies its chosen method consistently. For illustration only, assume the correctly determined self-only lowest-cost Silver premium is $650 per month under both analyses, and the monthly ICHRA amount is $300. In practice, the permitted premium inputs can differ.
| Question | Inputs and calculation | What follows |
|---|---|---|
| Employee Marketplace test | $48,000 household income ÷ 12 × 10.22% = $408.80/month. | $650 − $300 = $350/month, below $408.80. The offer meets this simplified affordability comparison. |
| Employer hourly rate-of-pay screen | 130 × $20 × 10.22% = $265.72/month. | The same $350 required amount exceeds $265.72. This particular safe-harbor screen is not met; that alone does not establish a penalty. |
| Employee’s chosen policy | Assume the employee accepts the ICHRA and chooses qualifying self-only coverage costing $760/month, with the full allowance available for premiums. | $760 − $300 = $460/month before deductibles and other costs. This is a different question from the benchmark test. |
The rate-of-pay method uses 130 hours as a regulatory factor, not the employee’s actual hours or household income. For an hourly employee, the rule uses the lower of the rate at the start of the coverage period and the lowest rate during the month; this example holds both at $20. W-2 and federal-poverty-line safe harbors have their own conditions. source source
Keep the rule status attached. The 2019 ICHRA-specific location and look-back provisions cited here were issued as proposed regulations with reliance allowed for plan years beginning before six months after publication of final regulations. They are not described here as a newly finalized rule. Confirm the applicable reliance conditions and any later rule before using those substitutions. An employer safe harbor does not replace the employee’s Marketplace household-income determination. source
An affordable offer generally blocks premium tax credits for the employee and family members offered the arrangement even if declined. Family members not offered it need their own eligibility review. When an offer is unaffordable, opting out is necessary to seek an otherwise available premium tax credit; accepting ICHRA and using that credit for the same month are not interchangeable options. source source
What should you check next?
- Employee: take the written offer and accurate household information to the Marketplace; then compare your chosen policy’s net premium, network and out-of-pocket costs.
- Employer: record the safe harbor, correct reference premium, offer population and supporting evidence. A failed rate-of-pay screen needs further review, not an automatic penalty conclusion.
- Both: use the employer-and-employee cost example to see why a lower company budget need not lower the employee’s cost.
For the household-budget question, compare low-use and high-use years in our worked example of premiums and costs of care. An out-of-pocket maximum excludes premiums and some other expenses; do not add the deductible to it again.
What this guide does not decide
This page explains the published percentage and illustrates its use. It does not calculate eligibility for a particular employee, recommend a contribution, establish employer compliance, or evaluate a household's tax position. The example deliberately holds several inputs constant; real premiums, incomes, coverage circumstances, and plan designs vary.
For the earlier period, use the 2026 affordability guide. For a broader employer review, continue with the implementation checklist and provider-selection framework. Bring the unresolved questions and source records to your benefits adviser.
Sources and evidence
Review dates are recorded for each source above. Company pages are useful for confirming how a product is described, but they do not prove service quality or customer results.