TL;DR: The 2026 ACA affordability percentage gives employers more room on employee only premiums, but that compliance test does not measure what a worker pays for family coverage. IRS guidance sets the 2026 affordability percentage at 9.96 percent. KFF found the average worker family contribution reached $6,850 in 2025. Put those together and a plan can pass ACA math while still pricing many families out.

The compliance number got easier

The 2026 ACA affordability percentage is 9.96 percent for plan years beginning in calendar year 2026, according to IRS Revenue Procedure 2025 25. That is up from 9.02 percent in 2025.

For an applicable large employer, that sounds like breathing room. It lets the employer charge a higher employee only premium for the lowest cost minimum value plan without failing the affordability test.

That is where many renewal meetings stop.

They should not.

The affordability test is narrow. It looks at the employee required contribution for the lowest cost employee only coverage. It does not test the cost of adding a spouse. It does not test the cost of covering children. It does not ask whether the employee who can afford single coverage can afford the family tier sitting next to it in the enrollment system.

That gap matters most for employers with hourly employees, mixed wage bands, and a lot of workers in the 30 to 45 hour range.

The family number moved the other way

KFF reported that average family premiums for employer coverage reached $26,993 in 2025. Workers paid $6,850 of that amount on average, or about $571 per month, according to the 2025 KFF Employer Health Benefits Survey.

That is not a penalty number. It is payroll deduction reality.

KFF also found that workers in firms with 10 to 199 employees paid more for family coverage than workers at larger firms. The average worker family contribution at those smaller firms was $8,889 per year, or about $741 per month.

Here is the part most summaries miss. The ACA compliance threshold and the family payroll deduction can both rise at the same time. One makes the plan easier to pass on paper. The other makes enrollment harder at the kitchen table.

Those are different problems.

The 130 hour math changes the conversation

The IRS employer mandate rules use 130 hours of service in a calendar month as one full time measure. That makes the rate of pay safe harbor easy to translate into payroll terms.

At 9.96 percent, the maximum employee only monthly contribution under a simple rate of pay view looks like this:

Now place the KFF average family contribution next to it.

The national average worker family contribution of $571 per month equals 29 percent of monthly pay for a $15 worker at 130 hours. It equals 24 percent for an $18 worker. It equals 22 percent for a $20 worker.

The smaller firm average of $741 per month is heavier. It equals 38 percent of monthly pay at $15 per hour, 32 percent at $18, and 29 percent at $20.

The employee only tier can be perfectly compliant while the family tier is a nonstarter for the same employee.

This is why the family tier cannot be priced last

Many employers build contribution strategy from the single tier outward. They decide what the company can afford for employee only coverage, then let the dependent tiers absorb the rest.

That approach is tidy for budgeting.

It is rough for retention.

If the single tier is affordable but the family tier takes one quarter to one third of monthly pay for lower wage employees, the plan sends a mixed signal. The employer can say it offers coverage. The employee can see that coverage does not really extend to the people at home.

That is where enrollment breaks. Workers waive dependents. Spouses stay on worse plans. Children land elsewhere. Employees start comparing job offers by family payroll deduction, not by the headline carrier name.

This is not only a low wage issue. It shows up in trades, hospitality, logistics, home health, manufacturing, and any employer where overtime varies. A $22 employee working 160 hours in a strong month may look comfortable. The same employee at 130 hours during a slower month may see the family premium eat the margin.

The practical test is not one affordability test

Run three tests before accepting a renewal.

First, run the formal ACA affordability test for the lowest cost employee only plan. That is the compliance floor. For 2026, use 9.96 percent for plan years beginning in calendar year 2026, and coordinate with your tax or legal adviser on the safe harbor you use.

Second, run a family contribution stress test by wage band. Use actual hourly rates, not average payroll. Price family coverage at 130 hours, 150 hours, and 173.33 hours if your workforce includes hourly staff. That shows whether the same payroll deduction feels different across schedule patterns.

Third, compare the dependent tiers against retention risk. Look at roles where replacement cost is high, where spouse and child coverage matters, and where competitors advertise richer family contributions. The family tier may deserve more subsidy even if the single tier is already safe.

This is where contribution strategy becomes more than a renewal spreadsheet. It becomes a workforce decision.

A simple 60 employee example

Assume a 60 employee company has 38 enrolled employees. Twelve carry family coverage. The renewal shows a 7 percent increase.

The company has three options.

Option one keeps the employer budget flat and pushes most of the increase into family payroll deductions. Employee only coverage stays under the 2026 ACA limit. Family coverage rises from $590 to $710 per month.

Option two protects employee only coverage and splits the family increase. The employer adds $75 per month for family contracts. The employee family deduction lands around $635.

Option three keeps the carrier but changes structure. The employer pairs a lower premium plan with a richer employer contribution for family coverage, then uses a buy up option for employees who want the larger network.

Option one may pass compliance and fail retention. Option two costs $10,800 per year if all twelve family contracts stay enrolled. Option three needs more communication, but it may protect families without moving every employee into the richer plan.

The right answer depends on claims, census, carrier options, and labor pressure. The wrong answer is pretending the ACA employee only test tells you whether families can use the plan.

When ICHRA enters the discussion

The same gap matters when an employer evaluates ICHRA. An ICHRA can control employer cost by setting a defined monthly allowance. That helps the company budget. It also moves the employee decision into the individual market, where age, geography, household income, and subsidy eligibility shape the final price.

If the group plan family tier is already painful, ICHRA may deserve a serious look.

If the employer has a stable family tier with good participation, ICHRA can create new disruption.

Do not compare ICHRA only against the employee only premium. Compare it against the actual family payroll deductions employees face today and the likely individual market cost by household type.

For some employers, level funded coverage gives more control without moving families out of the group plan. For others, self funded coverage makes sense once claims data and headcount support it.

The funding model is the second question. The first question is simpler. Which employees cannot afford to enroll the people they actually need covered?

What to ask before you sign

Ask for these numbers before renewal approval:

The goal is not to make every dependent tier cheap. That is usually impossible.

The goal is to know which tier is carrying the pain, which employees feel it, and whether that pain is worth the savings.

The renewal takeaway

The 2026 ACA affordability increase is useful. It may keep more employee only offers inside the compliance line.

But it can also hide a bigger benefits problem. A plan can be affordable under the employer mandate and still be functionally unaffordable for families.

That is the renewal question employers should answer before open enrollment, not after employees start waiving coverage.

Frequently Asked Questions

What is the ACA affordability percentage for 2026?

For plan years beginning in calendar year 2026, the ACA required contribution percentage is 9.96 percent under IRS Revenue Procedure 2025 25.

Does ACA affordability include family coverage?

For employer mandate affordability testing, the key calculation looks at the employee required contribution for the lowest cost employee only coverage that provides minimum value. Family tier cost is a separate workforce and enrollment issue.

How much do employees pay for family health insurance?

KFF reported that workers paid $6,850 per year on average toward family coverage in 2025. Workers at firms with 10 to 199 employees paid an average of $8,889.

Why can a compliant health plan still feel unaffordable?

The compliance test can pass because employee only coverage is under the limit. The family tier can still require hundreds more per month, which hits employees with spouses or children much harder.

How should employers test family premium affordability?

Run family payroll deductions by wage band. For hourly employees, test the deduction at 130 hours per month and compare it with actual monthly pay, not only annual salary averages.

Can level funded or ICHRA plans fix the family premium gap?

Sometimes. Level funded plans may give the employer more plan design control. ICHRA may help some groups by setting a defined contribution. Both need to be tested against employee household cost, not only employer budget.