What Small Business Owners Need to Know About Employee Benefits in 2026

If you run a small business, you already know that offering employee benefits isn't getting any easier. The rules keep changing. Premiums keep rising. And your employees expect more than ever.

As someone who works with business owners every day on these issues, I want to share three big trends that are shaping how benefits will need to evolve in 2026—and what they might mean for your company.

🔥 1. ACA Compliance Is Getting Stricter (and More Expensive If You Miss Something)

If you have close to 50 employees—or are growing—you’ve probably heard of the Affordable Care Act’s coverage and affordability rules. What’s changed recently is that the IRS is putting more pressure on employers to prove they’re compliant. And the penalties are no joke.

For 2024, the affordability threshold dropped to 8.39% of household income (down from 9.12%), which means many businesses are now unintentionally noncompliant without realizing it. That can cost up to $4,460 per full-time employee per year if you're audited by the IRS (IRS).

What I’m telling clients: Now’s the time to double-check if your plan meets the current affordability standards—and make sure your reporting is accurate. A short review can save a lot of headaches so speak with your CPA or tax professional.

💸 2. Health Plan Costs Keep Rising—So Smarter Strategies Matter More Than Ever

This probably won’t surprise you: according to PwC, healthcare costs are expected to rise 6–9% per year for the foreseeable future (PwC).

What might surprise you is how many small businesses are fighting back by rethinking how they offer coverage.

I’m seeing more owners explore things like:

• Level-funded or self-funded plans (yes, even with fewer than 10 employees)
• ICHRAs or QSEHRAs, where the business reimburses employees for individual coverage
• High-deductible plans paired with HSAs and supplemental coverage to keep out-of-pocket costs low

What should you do: If you haven’t re-evaluated your plan structure in the last 12–18 months, there’s a good chance you’re leaving money on the table.

🌱 3. Today’s Employees Want More Than Just Health Insurance

This one’s not just about numbers—it’s about people. Younger employees, especially Gen Z and Millennials, expect more personalized and flexible benefits. And the truth is, it’s becoming a deal-breaker.

According to MetLife, 73% of employees say benefits tailored to their needs increase their loyalty to their employer (MetLife).

Some of the most valued additions I’ve seen lately include:

• Mental health support (virtual counseling, EAPs)
• Voluntary benefits like dental, vision, and even pet insurance
• Lifestyle perks like student loan help or financial wellness programs

What I’m seeing work: Offering even a basic “menu” of add-ons can help small businesses compete with much bigger companies—without blowing up the budget.

One Last Thing: Compliance & Cyber Risk Are No Longer Optional

Beyond benefits design, more small businesses are being caught off guard by compliance requirements—things like ERISA notices, 125 plan testing, and COBRA documentation. At the same time, cyber risks tied to employee health data are increasing.

This isn’t to scare anyone—it’s just the reality of doing business in 2026.

Final Thought

If you haven’t looked closely at your employee benefits in a while, it’s worth taking 20 minutes. A quick review might uncover ways to help:

• Save money
• Improve employee satisfaction
• Or simply reduce your compliance risk

And if everything’s already in great shape? Even better.

Feel free to reach out if you want to talk through it. No pressure, just a conversation.

Sources:

1.      Employer shared responsibility provisions | Internal Revenue Service

2.      Medical cost trend: Behind the numbers: PwC

3.      Workforce Insights | MetLife

This informational and educational discussion is not intended – and should not be relied upon – as investment or financial advice.  PPG- 8164430.1(7/25)(Exp.7/29)