# ICHRA affordability calculator for 2026 and 2027

Source: https://www.getprescience.com/tools/ichra-affordability-calculator
Author: Rishab Jain, Cofounder and CEO, Prescience
Published: 2026-10-20
Updated: 2026-10-20

An individual coverage HRA is affordable when the lowest-cost silver plan's self-only premium, minus your monthly allowance, is no more than 9.96% of the employee's income in 2026 or 10.22% in 2027. Employers can test against the same safe harbors used for group plans. Enter the silver premium and your allowance to see the smallest allowance that passes.

- **2027 affordability limit:** 10.22%
- **2026 affordability limit:** 9.96%
- **Benchmark plan:** Lowest-cost silver, self-only
- **Prescience Choice:** $20 per enrolled employee/month

## Find the smallest affordable allowance

_Interactive calculator: open the page in a browser to use it. The rules and figures it applies follow._

I built this because almost every ICHRA conversation I have with a founder starts with the same question: how much do we have to give people? The answer is set by one number per employee, the cost of the cheapest silver plan where they work, and the calculator turns that into the minimum allowance. Run it for your oldest employee in each class, because silver premiums rise with age.

## How the ICHRA affordability test works

With a group plan, affordability looks at what the employee pays for your cheapest plan. With an ICHRA there is no plan you offer, so the test uses a stand-in: the **lowest-cost silver plan (LCSP)** for self-only coverage on the exchange. The employee's "required contribution" is the LCSP premium minus the monthly allowance you give them for self-only coverage.

If that required contribution is at or below the affordability percentage of income (9.96% in 2026, 10.22% in 2027), the ICHRA is affordable. For an applicable large employer, an affordable ICHRA that also counts as minimum value protects you from the section 4980H(b) penalty. For any size employer, it decides whether employees can drop the ICHRA and take a premium tax credit instead.

**What the ICHRA test compares**

| Input | Which number to use |
| --- | --- |
| Benchmark premium | Lowest-cost silver plan, self-only, for the employee's age |
| Location (employer safe harbor) | The employee's primary work site; remote workers use their home |
| Allowance | The self-only amount you make available to that employee class |
| Income | One of three safe harbors: federal poverty line, rate of pay or W-2 wages |

Family members don't change the employer test. You can offer larger allowances for families, but only the self-only amount and the self-only silver premium count toward affordability.

## Safe harbors that make the test practical

You don't know an employee's household income, and the exchange prices plans by ZIP code and age. The IRS gives ICHRA employers three simplifications so the test can be run before the plan year:

- **Location safe harbor.** Use the LCSP at the employee's primary site of employment instead of where they live. Remote employees work from home, so their home ZIP is the site.
- **Look-back month.** Use the silver premiums for January of the prior calendar year when your plan year starts in a calendar year. This lets you set 2027 allowances using premiums that are already published.
- **Income safe harbors.** The same federal poverty line, rate of pay and W-2 safe harbors used for group coverage. The calculator applies all three.

The FPL safe harbor is the strictest and simplest: in 2027 an employee can be asked to pay at most $135.92 a month in the contiguous states and DC. If your allowance covers the silver premium minus $135.92 for everyone, you never need payroll data to prove affordability.

## Worked examples

**A 40-year-old engineer in Austin, FPL safe harbor, 2027**

Illustrative. The lowest-cost silver plan for a 40-year-old at the work ZIP costs $520 a month. The company offers a $400 monthly self-only allowance.

- Silver premium: $520.00
- Allowance: $400.00
- Employee's required contribution: $120.00
- Most allowed (FPL, 2027): $135.92

**Affordable,** with $15.92 of room. The smallest affordable allowance is $384.08 a month.

**A 60-year-old in the same office**

Illustrative. Silver premiums for a 60-year-old are often about 2.5 times a 40-year-old's. Here the LCSP is $1,300 a month and the allowance is still $400.

- Silver premium: $1,300.00
- Allowance: $400.00
- Required contribution: $900.00
- Most allowed (FPL, 2027): $135.92

**Unaffordable** under FPL. The company can raise allowances by age (ICHRA allows up to a 3:1 ratio for the oldest to youngest), or test this employee under rate of pay if their salary supports it: at $120,000 a year, 10.22% of monthly pay is $1,022, so $900 passes.

## Rules that trip employers up

- **Same terms within a class.** Allowances must be the same for everyone in a class (for example full-time, part-time, salaried, hourly, or by rating area), except that they can rise with age and family size.
- **No choosing between ICHRA and group in one class.** You can't offer the same class both a traditional group plan and an ICHRA.
- **Opt-out.** Employees must be able to opt out of the ICHRA each year, and anyone who opts out of an unaffordable ICHRA can claim premium tax credits.
- **Notice.** Send each eligible employee a written notice at least 90 days before the plan year starts.
- **Coverage verification.** Employees must have individual health insurance (or Medicare) to be reimbursed, and the administrator must verify it.

> **Where most small teams land:** For a company under 50 full-time equivalents there's no employer penalty, so affordability mainly decides who can choose subsidies instead. I still recommend designing for affordability: it's how you know the allowance is enough to buy a real plan.

## How I'd set allowances for a real team

The calculator answers the compliance question for one person. Designing allowances for a whole company is a slightly different exercise, and it's the one I walk founders through most often. The goal is an allowance that is affordable for everyone, buys a plan people actually want, and keeps the company's monthly spend predictable.

1. **List every employee's age and work ZIP code** Silver premiums are set by age and rating area, so these two facts drive almost everything. Remote employees use their home ZIP. Group people by state or rating area if you have more than a handful of locations.
2. **Look up the lowest-cost silver premium for each person** Use HealthCare.gov's plan preview or your state exchange, for self-only coverage at each age. Under the look-back rule you can use the prior January's premiums for a calendar-year plan.
3. **Pick a safe harbor** FPL is simplest because it needs no pay data, but it demands the largest allowance. Rate of pay lets well-paid teams pass with smaller allowances. Most venture-backed companies I talk to can pass under rate of pay with room to spare.
4. **Find the worst case in each class** The oldest employee in a high-cost area usually sets the floor. If one person forces a large allowance for everyone, age-banded allowances (up to 3:1) solve it without overpaying younger employees.
5. **Decide how generous to be above the minimum** Affordable only means the employee pays no more than about a tenth of pay for the cheapest silver plan. Many companies give enough to cover a mid-priced silver or gold plan so the benefit feels like real coverage, not a discount.
6. **Add dependents if you want to** Family allowances don't affect affordability, but they decide whether parents can afford to cover their kids. A common pattern is a set amount per employee plus a smaller amount per dependent.

Two practical notes. First, individual premiums can change a lot from one year to the next (many states saw double-digit increases for 2026), so rerun this every fall before your 90-day notice goes out. Second, the employee's actual plan choice doesn't matter for the test: if they pick a more expensive gold plan, they pay the difference, and the ICHRA is still affordable.

**Which safe harbor to start with**

| Your team | Start with | Why |
| --- | --- | --- |
| Everyone well paid (for example $90,000+) | Rate of pay | Smallest compliant allowance |
| Mixed hourly and salaried staff | Rate of pay by category | Hourly and salaried can use different safe harbors |
| You want one number for everyone | Federal poverty line | No payroll data needed, but the largest allowance |
| You can't confirm pay until year-end | W-2 as a backup only | You only know Box 1 wages after the year ends |

## Running your ICHRA with Prescience Choice

Once you know your allowance, someone has to show employees the plans available to them, help them enroll, verify coverage and track reimbursements. That's what Prescience Choice does, and it's priced below the platforms most founders compare us to.

> **Prescience Choice: ICHRA for $20 per enrolled employee per month.** We use the same affordability math as this calculator when we set up your allowances, so every class passes before enrollment opens.
> - **You set a monthly allowance;** each employee picks and owns an individual plan
> - **$20 per enrolled employee per month,** with no setup or platform fee
> - **Works in all 50 states and DC,** so remote and multi-state teams fit
> - **Plan comparison, enrollment help and Crystal,** our assistant for benefits questions
> Best for small teams, teams in several states, and anyone pricing ICHRA. [Get a Choice quote](https://www.getprescience.com/employer/choice)

If your team is about 15 people or more in a few states, compare a group plan too. A group plan with an effective $0 deductible can cost less per person than allowances large enough to buy good individual coverage for older employees. Our [savings calculator](https://www.getprescience.com/savings) compares both.

## Frequently asked questions

**What makes an ICHRA affordable in 2027?**

The lowest-cost silver plan's self-only premium minus the employee's monthly self-only allowance must be at or below 10.22% of income, measured under one of the IRS safe harbors. In 2026 the limit is 9.96%.

**Which silver plan do I use for an ICHRA?**

The lowest-cost silver plan available on the exchange for self-only coverage at the employee's age. For the employer safe harbor, use the employee's primary work location; for remote workers that is their home.

**Does a family allowance affect ICHRA affordability?**

No. The test uses only the self-only allowance and the self-only silver premium. Larger family allowances are allowed but don't count.

**Can I vary ICHRA allowances by age?**

Yes. Allowances may increase with age, as long as the oldest employee's amount is no more than three times the youngest's within the class, and they may increase with the number of dependents.

**Do small businesses need an affordable ICHRA?**

There's no federal penalty under 50 full-time equivalents. But if the ICHRA is unaffordable, employees can opt out and claim premium tax credits, and if it is affordable, anyone who accepts it can't also take a credit.

**What does Prescience Choice cost?**

$20 per enrolled employee per month by default, with no setup or platform fee. The allowance you set is separate and goes to employees' premiums.

**Is ICHRA affordability the same as group plan affordability?**

The percentage and income safe harbors are the same. The difference is the cost being tested: the silver premium minus the allowance, instead of the employee's share of your cheapest group plan.

## Sources

- [26 CFR 54.4980H-5, affordability safe harbors including ICHRA](https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980H-5)
- [IRS Revenue Procedure 2026-26 (2027 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-26-26.pdf)
- [IRS Revenue Procedure 2025-25 (2026 affordability percentage)](https://www.irs.gov/pub/irs-drop/rp-25-25.pdf)
- [CMS, Health Reimbursement Arrangements (ICHRA) overview](https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements)
- [Final ICHRA regulations, Federal Register (June 20, 2019)](https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans)
- [HHS ASPE, Poverty guidelines](https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines)