The IRS has announced that the Affordable Care Act (ACA) affordability threshold will increase to 10.22% for plan years beginning in 2027, up from 9.96% for 2026. The new percentage was established in IRS Revenue Procedure 2026-26.
For applicable large employers (ALEs), generally those with at least 50 full-time and full-time equivalent employees, this percentage is important when determining whether an offer of coverage is affordable under the ACA employer shared responsibility rules. In general, affordability is based on the employee’s required contribution for the lowest-cost self-only coverage that provides minimum value. Because employers typically do not know an employee’s household income, they may use one of the ACA’s affordability safe harbors.
Employer Action Items
The higher 2027 threshold may give employers additional flexibility when setting employee contributions for health coverage. Employers preparing for 2027 should:
- Review employee contribution requirements during renewal and budgeting.
- Update affordability calculations to use the 10.22% threshold for plan years beginning in 2027.
- Confirm that applicable affordability safe harbors are being calculated and applied correctly.
- Coordinate any contribution changes with ACA reporting and compliance processes.
This information has been prepared by UBA. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
