ACA 3602027 ACA AFFORDABILITY PERCENTAGE INCREASES TO 10.22%
2027 ACA AFFORDABILITY PERCENTAGE INCREASES TO 10.22%
2027 ACA AFFORDABILITY PERCENTAGE INCREASES TO 10.22%
The IRS has announced that the Affordable Care Act affordability percentage will increase to 10.22% for plan years beginning in 2027.
The percentage is currently 9.96% for plan years beginning in 2026. The new rate was published in IRS Revenue Procedure 2026-26 on July 27, 2026.
For employers preparing health plan contributions for 2027, this percentage is an important part of determining whether an offer of coverage is considered affordable under the ACA.
WHAT DOES THE AFFORDABILITY PERCENTAGE MEAN?
Applicable Large Employers, commonly referred to as ALEs, must offer affordable, minimum value health coverage to their full-time employees or potentially face an employer shared responsibility penalty.
For 2027 plan years, an employee’s required contribution for the lowest-cost, employee-only plan that provides minimum value cannot exceed 10.22% of the income amount used for the affordability calculation.
The calculation is based on the amount the employee must pay for employee-only coverage. The cost of covering a spouse, child, or family is not included when determining the employer’s potential penalty exposure under the ACA employer mandate.
HOW DO EMPLOYERS DETERMINE AFFORDABILITY?
ACA affordability is technically based on an employee’s household income. Because employers generally do not know an employee’s total household income, the ACA provides three affordability safe harbors.
The available safe harbors are the federal poverty line safe harbor, the rate of pay safe harbor, and the Form W-2 safe harbor.
Each safe harbor uses a different dollar amount as the starting point for the calculation. The employer applies the 10.22% affordability percentage to that amount to determine the maximum employee contribution allowed under the selected safe harbor.
An employer may use different safe harbors for reasonable categories of employees, such as hourly and salaried employees, as long as the selected method is applied uniformly and consistently within each category.
DOES THE INCREASE MEAN EMPLOYERS CAN CHARGE MORE?
The increase from 9.96% to 10.22% allows a slightly larger percentage of the applicable income amount to be used toward the employee’s required contribution.
It does not automatically mean that every employer can increase employee contributions and remain compliant.
Affordability still depends on the safe harbor selected, the dollar amount used in the calculation, the employee contribution for the lowest-cost, employee-only plan that provides minimum value, and the way the safe harbor is applied to the employer’s workforce.
A contribution amount that is affordable for one employee group may not be affordable for another.
WHAT SHOULD EMPLOYERS DO NOW?
Employers preparing for a 2027 plan year should review affordability before finalizing employee contribution amounts.
The review should confirm the plan year start date, identify the lowest-cost employee-only plan that provides minimum value, determine which affordability safe harbor will be used, and test the proposed employee contribution using the new 10.22% percentage.
The increase provides employers with slightly more flexibility for 2027, but the underlying calculation still matters. Affordability must be evaluated using the correct plan, safe harbor, employee contribution, and plan year.
ACA 360 helps employers evaluate affordability and manage the employee eligibility information needed to support ACA compliance throughout the year.
This article is provided for general informational purposes only and is not legal or tax advice.
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