September 18, 2026

ACA 360

2027 ACA Open Enrollment Checklist for Employers

ACA Compliance

Reviewing affordability, eligibility, and employee contributions for the 2027 plan year

Open enrollment is more than a benefits enrollment project. The contribution amounts, plan options, and eligibility information approved during this process affect ACA affordability, coverage offers, payroll deductions, and Form 1095-C reporting during the 2027 plan year.

For plan years beginning in 2027, the ACA affordability percentage is 10.22%, up from 9.96% for plan years beginning in 2026. The higher percentage gives employers additional room when setting employee contributions, but it does not make every contribution structure affordable.

Before approving 2027 rates, employers should confirm the applicable lowest-cost employee-only plan, test affordability using the appropriate safe harbor, reconcile the open enrollment population with ACA eligibility records, and retain the supporting analysis.

1. Confirm Applicable Large Employer status

The ACA Employer Shared Responsibility provisions apply to Applicable Large Employers, or ALEs. An employer is an ALE for a calendar year if it averaged at least 50 full-time employees, including full-time-equivalent employees, during the preceding calendar year.

Employers under common ownership or otherwise treated as a single employer under the applicable aggregation rules are combined when determining whether the group reaches the ALE threshold. Once the group is determined to be an ALE, each applicable large employer member is evaluated separately for its offers of coverage, reporting obligations, and potential Employer Shared Responsibility payments.

Before reviewing 2027 contributions, confirm:

Which entities are included in the controlled group or affiliated service group analysis.
Which entity employs each employee.
Whether acquisitions, divestitures, or ownership changes affected the ALE determination.
Whether each employer identification number is being evaluated separately for offers of coverage and ACA reporting.

A contribution strategy reviewed only at the parent-company level can overlook differences among individual ALE members.

2. Identify the plan used for affordability testing

ACA affordability is not based on the plan employees select most often. It is based on the employee’s required contribution for the lowest-cost employee-only coverage that provides minimum value and is available to that employee.

Employers should confirm:

Which available option is the lowest-cost employee-only plan.
Whether that plan provides minimum value.
Which employee groups can enroll in that option.
Whether different entities, locations, unions, or employee classes have different lowest-cost options.
Whether the correct employee-only contribution is reflected in enrollment materials and payroll records.

Employer contributions toward dependent or family coverage may reduce the employee’s overall cost, but they do not replace the affordability analysis for employee-only coverage.

3. Understand what the 10.22% standard measures

Under the ACA’s statutory affordability test, coverage is affordable when the employee’s required contribution for the applicable employee-only coverage does not exceed 10.22% of the employee’s household income for plan years beginning in 2027.

Employers usually do not know an employee’s household income. For that reason, the Employer Shared Responsibility regulations provide three optional affordability safe harbors:

Federal poverty line.
Rate of pay.
Form W-2 wages.

These safe harbors do not change the household-income test used to determine an individual’s eligibility for a premium tax credit. They provide an employer with a method for demonstrating affordability for purposes of potential liability under Section 4980H(b), provided all applicable requirements are satisfied.

The 10.22% percentage applies to plan years beginning in 2027. A non-calendar-year plan beginning in 2026 continues to use the percentage applicable to plan years beginning in 2026 until that plan year ends.

4. Select and document an affordability safe harbor

Each safe harbor uses a different income measure and can produce a different maximum employee contribution.

Federal poverty line safe harbor

The federal poverty line safe harbor can support one uniform employee contribution amount and is often the simplest method to administer. It can also require a larger employer contribution than another safe harbor.

The calculation must use the permitted federal poverty guideline, the applicable affordability percentage, and the correct guideline for the state in which the employee is employed. Separate guidelines apply to Alaska and Hawaii.

Rate-of-pay safe harbor

For an hourly employee, the rate-of-pay safe harbor is based on 130 hours multiplied by the lower of the employee’s hourly rate on the first day of the coverage period or the employee’s lowest hourly rate during the month.

For a salaried employee, the safe harbor is based on the employee’s monthly salary as of the first day of the coverage period. If the employee’s monthly salary is reduced, including because of a reduction in work hours, the employer cannot use the rate-of-pay safe harbor for that employee.

Form W-2 safe harbor

The Form W-2 safe harbor uses the employee’s Box 1 wages from the employer. It is calculated after the end of the calendar year and applied employee by employee.

Box 1 wages can be affected by partial-year employment, unpaid leave, and pretax salary reductions. Employers relying on this method should model proposed contributions carefully before the plan year begins.

An employer can use different safe harbors for reasonable employee categories, such as hourly and salaried employees or employees in different geographic locations. The method must be applied uniformly and consistently within each category. Categories designed around individual employees do not satisfy this standard.

Employers should select, model, and document the intended safe harbor for each employee category before the plan year begins.

5. Test every relevant employee population

An affordability calculation based on an average salary or one sample employee can miss the employees most likely to fail the selected safe harbor.

Test proposed contributions across the populations affected by the plan, including:

Lower-wage employees.
Hourly and salaried employees.
Employees in different locations or legal entities.
Employees eligible for different plan options or employer contributions.
Variable-hour and seasonal employees who become ACA full-time.
Employees whose pay or schedule changes during the year.
Employees affected by transfers between positions, locations, or entities.
Employees hired or rehired during the plan year.

If contributions vary by entity, employee category, location, or plan, each variation requires its own review.

6. Review incentives, credits, and opt-out arrangements

The amount displayed on an open enrollment rate sheet is not always the amount used for ACA affordability.

The required contribution can be affected by:

Wellness incentives and surcharges.
Tobacco-related wellness incentives.
Employer flex contributions.
Cash-in-lieu or opt-out payments.
Health reimbursement arrangements.
Other employer payments tied to health coverage.

These arrangements are subject to specific rules, and their treatment depends on how they are designed. The structure and plan documents should be reviewed before the employer determines the contribution amount used for affordability.

7. Confirm who must receive an offer and when

An affordable plan does not correct a missed or late offer of coverage. Before open enrollment is finalized, employers should compare the enrollment population with their ACA eligibility records.

The review should include:

Employees expected to work full-time.
Employees currently in initial or standard measurement periods.
Employees entering a stability period.
Variable-hour and seasonal employees whose measurement periods are ending.
Employees who changed positions, schedules, locations, or employing entities.
Rehires and employees returning from leave.

Under the look-back measurement method, an employee who earned full-time status during a measurement period must be treated as full-time during the corresponding stability period, subject to the applicable rules. A later change in schedule, title, or internal classification does not automatically remove that status.

A benefits administration system that relies only on an employee’s current HR classification can omit an employee who must receive an offer under the ACA. The open enrollment list should therefore be compared with the ACA eligibility population.

8. Reconcile contribution and eligibility data

Once the contribution structure is approved, confirm that each system contains the information it needs to perform its specific function correctly.

Review whether:

Enrollment materials display the approved rates and eligible plan options.
The benefits administration platform applies the correct benefit-plan eligibility rules.
Payroll uses the correct deduction by coverage tier and pay frequency.
HR records identify the correct employing entity, work location, compensation, and classification.
The ACA compliance system receives the correct employee contribution for the applicable lowest-cost plan.
ACA full-time status and stability-period protections are reflected in the offer process.
Vendor files use consistent plan names, effective dates, and employee identifiers.
Offers, waivers, declinations, and terminations are retained accurately.

Benefit-plan eligibility and ACA full-time status are not interchangeable. Each system must use the correct rules, and the information passed between systems must be complete and consistent.

9. Retain the affordability analysis

The final rate sheet does not explain how an employer reached its affordability determination.

The supporting file should identify:

The plan year.
The 10.22% affordability percentage.
The lowest-cost employee-only plan providing minimum value for each applicable population.
The safe harbor used for each reasonable employee category.
The compensation or federal poverty guideline data used in the calculation.
The treatment of incentives, flex credits, opt-out payments, and reimbursement arrangements.
The employee populations tested.
The calculation results.
The individuals who reviewed and approved the contribution structure.

This documentation allows the employer to reproduce its analysis if the contribution reported on Form 1095-C is later questioned or the employer receives an IRS inquiry.

Before approving 2027 contributions

An employer should be able to answer yes to each of these questions:

Have we identified the lowest-cost employee-only plan providing minimum value for every eligible population?
Have we applied the 10.22% percentage through an appropriate affordability safe harbor?
Have we tested each contribution structure against the employees affected by it?
Have we reviewed incentives, credits, opt-out payments, and reimbursement arrangements?
Have we compared the open enrollment population with our ACA eligibility records?
Do our enrollment, payroll, HR, and ACA systems contain complete and consistent information?
Can we reproduce the analysis supporting our final contribution decision?

Open enrollment brings several ACA decisions together at one time: the plan offered, the employee contribution, the population receiving the offer, and the data sent to payroll and reporting systems. Reviewing those decisions before the plan year begins gives the employer a clear, supportable contribution structure for 2027.

ACA 360 reviews proposed employee contributions, affordability safe harbors, eligibility populations, and reporting data before rates are finalized. To discuss a 2027 affordability and open enrollment review, contact ACA 360.

This article is provided for general informational purposes only and does not constitute legal or tax advice. Employers should consult qualified legal or tax counsel regarding their specific circumstances.