An Individual Coverage HRA must meet its own separate affordability test for an Applicable Large Employer to avoid ACA employer mandate penalties.
How it works
The lowest-cost silver plan premium minus the employer’s ICHRA contribution gives the employee’s net cost. Comparing that against 9.96% of monthly income (the 2026 affordability threshold) determines whether the offer is affordable.
What this does not include
This computes the general affordability comparison directly against income — in practice, employers often use one of several IRS-approved safe harbors (Federal Poverty Level, Rate of Pay, or W-2) instead of directly measuring actual household income, which they typically don’t have access to.
How to use this calculator
- Enter monthly income, the lowest-cost silver plan premium, and the monthly employer ICHRA contribution.
Frequently asked questions
Why does the affordability percentage change each year?
It’s indexed annually based on premium growth relative to income growth, so the specific percentage threshold shifts from year to year rather than staying fixed.
What happens if an ICHRA offer isn’t affordable?
An Applicable Large Employer can face a shared responsibility penalty under the ACA employer mandate if an employee receiving an unaffordable ICHRA offer instead gets subsidized marketplace coverage.
Why use a safe harbor instead of actual household income?
Employers generally don’t have visibility into an employee’s full household income (including a spouse’s earnings) — safe harbors let them test affordability using information they do have, like the employee’s own W-2 wages.
