What income thresholds would change under the 2026 proposals for determining eligibility for ACA premium tax credits?

1. Employer test: the affordability percentage rises to 9.96%

The IRS announced an affordability percentage of 9.96% to determine whether employer‑sponsored self-only coverage is “affordable” for 2026 plan years; employers that cannot show employee contributions for the lowest-cost self-only option are below that share risk employer‑mandate exposure ^{[1] [3]}. Multiple compliance guides note the increase from 9.02% in 2025 to 9.96% in 2026 and explain employers may rely on one of three safe harbors (FPL, rate-of-pay, or Form W-2) because employers typically lack household income data ^{[1] [7] [3]}.

2. Safe‑harbor dollar thresholds change with the percentage

Because the percentage rises, the dollar caps derived from safe harbors also move upward — for example, the FPL safe harbor uses the federal poverty guideline divided by 12 and for 2026 the mainland U.S. annual poverty guideline baseline cited is $15,650 (or $129.90 per month), producing an FPL-based maximum employee contribution consistent with the 9.96% rule for plan-year administration ^{[2] [7] [3]}. Employer advisories give example monthly thresholds (e.g., roughly $258.96/month in a rate‑of‑pay example) to illustrate how the higher percentage affects affordability calculations ^[1].

3. Marketplace subsidies: income bands and the 400% FPL cliff return unless extended

On the individual marketplace side, the temporary enhanced premium tax credits in effect 2021–2025 expire unless Congress acts; under current law for 2026, subsidies return to the ACA’s original sliding scale, with benchmark‑plan contribution shares ranging from about 2% at 100% FPL to 9.96% for households between 300% and 400% FPL, and households above 400% FPL would generally lose eligibility for premium tax credits ^{[4] [5] [6]}. Health policy analysts and marketplaces warn that expiration will make subsidies smaller and reinstate a hard eligibility cap near 400% FPL, producing significant premium increases for many enrollees ^{[8] [9]}.

4. Who gains/loses under the reversion — competing viewpoints

Policy analysts like the Committee for a Responsible Federal Budget and KFF describe the reversion as returning to the ACA formula — meaning predictable, lower subsidy generosity and a 400% FPL cutoff ^{[4] [5]}. Advocacy and health‑plan organizations emphasize the consumer shock that could follow: KFF estimates average marketplace payments could more than double if enhanced credits expire, while organizations like Bipartisan Policy Center and Health Affairs discuss political proposals to modify eligibility (e.g., capping at 400% or expanding to higher percentages) and the fiscal tradeoffs of extensions ^{[9] [10] [11]}.

5. Administrative details and transitional mechanics employers and consumers should watch

IRS guidance (Rev. Proc.) and employer resources note indexing and timing issues: employers with plan years starting Jan. 1, 2026, may use prior federal poverty guidelines for safe‑harbor math until 2026 guidelines are published, and the IRS also issued related health/welfare limits that interact with affordability calculations ^{[7] [12]}. On the Marketplace side, multiple fact sheets and advisories point to operational steps (verification, hardship exemptions for some newly ineligible individuals) that HHS and insurers are discussing to soften gaps for people newly outside the 100%–400% band ^{[13] [14]}.

6. Limits of the available reporting and what it does not say

Available sources document (a) the IRS 9.96% employer affordability rate and associated safe‑harbor dollar examples, and (b) that Marketplace premium tax credits would revert to ACA rules with the 400% FPL cap and the sliding applicable percentages (up to 9.96%) unless Congress extends enhancements ^{[1] [4] [6]}. Available sources do not mention any finalized new statutory changes enacted by Congress after 2025 that would alter the 2026 thresholds beyond these existing IRS and current‑law projections — negotiations and proposals are reported but no definitive post‑2025 law changing the thresholds is cited in the materials provided ^{[11] [15]}.

Bottom line: for 2026 plan administration, expect a higher employer affordability percentage (9.96%) that raises safe‑harbor dollar caps, and expect Marketplace subsidy rules to revert to the ACA sliding scale with a 400% FPL eligibility cap unless Congress acts — both shifts carry clear compliance and affordability implications for employers and consumers ^{[1] [4] [6]}.