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One of the hallmark provisions of the Affordable Care Act (ACA) requires Applicable Large Employers (ALEs), which are employers who averaged at least 50 full time or full time equivalent employees in the prior calendar year, to (1) offer minimum essential coverage (MEC) to at least 95% of their full-time employees and the dependent children of those employees and (2) ensure that minimum value (MV) coverage is affordable to their full-time employees at the lowest-cost, employee-only coverage level.
Employees who don’t receive an affordable offer of MV coverage may qualify for subsidized plans on the Exchange—triggering penalties for the employer. Importantly, ALEs are not required to offer affordable coverage to spouses or other dependents, though these individuals may also qualify for subsidies if their available employer-sponsored plan is unaffordable.
Under the ACA, a plan is considered affordable if the cost of the lowest-tier employee-only option falls under a set percentage of the employee’s household income. This baseline is adjusted annually by the IRS for inflation.
For 2026, the IRS has announced a new affordability percentage of 9.96%, up from 9.02% in 2025.