The IRS just set the 2027 ACA affordability threshold at 10.22% of household income, up from 9.96% in 2026. It's the highest the percentage has ever been, the first time it's broken 10% since the employer mandate began. That's more room to raise employee premium contributions and still stay compliant.
Key takeaways
- The 2027 ACA affordability percentage is 10.22% of household income, up from 9.96% in 2026, the highest since the ACA's employer mandate began (IRS Revenue Procedure 2026-26).
- A higher percentage means more room: you can charge employees more for the cheapest self-only plan and still meet the affordability safe harbor.
- Legally affordable isn't the same as actuarially safe. Pushing contributions to the max can drive healthy employees to waive coverage and leave you with adverse selection.
- The federal poverty line safe harbor works out to roughly $135.92 a month for 2027 calendar-year plans, up from $129.89 in 2026.
- Miss the threshold and the 4980H(b) penalty applies: $5,010 per affected employee in 2026 dollars, indexed higher for 2027.
- Recalculate your max employee contribution, and model the participation impact, before 2027 rates lock for renewal.
What is the 2027 ACA affordability threshold?
It's the ceiling on what you can charge a full-time employee for your cheapest, minimum-value self-only plan. Expressed as a share of income. For 2027, that ceiling is 10.22%.
The IRS set the number a few weeks ago in Revenue Procedure 2026-26. That's up from 9.96% for 2026, already high by ACA standards.
Cross the threshold and your coverage isn't just expensive. It's legally unaffordable. That opens up penalty exposure the moment one employee gets a subsidized Marketplace plan.
Why does the percentage keep climbing?
The IRS recalculates the affordability percentage every year. The formula compares premium growth to income growth nationally.
Premiums outrun income, the ceiling moves up. Income catches up, it comes back down. For 2027, premiums are still outrunning income.
That's why the number moved up again, and why it broke into double digits for the first time. Nothing about the mechanics changed. The math just kept going the same direction.
What does 10.22% mean for your employee contribution ceiling?
Take a hypothetical employee earning $50,000 a year. Under the 2026 threshold, the max for their self-only coverage was about $415 a month. That's 9.96% of income, divided by twelve.
At 10.22% for 2027, the ceiling rises to about $426 a month. Roughly $11 more room, per employee, per month, before you cross into unaffordable territory.
That's the math for the employee-only cost of your cheapest, minimum-value plan. It has nothing to do with family coverage or richer options. Most employers don't know a worker's actual household income, so the IRS allows three safe harbors instead: Form W-2, rate-of-pay, and federal poverty line.
Running an ICHRA instead of a group plan? The same three safe harbors apply, with a few extra wrinkles.
The FPL safe harbor is the easiest to use. It doesn't depend on any employee's actual pay. For 2027 calendar-year plans, it works out to roughly $135.92 a month, per Mercer's calculation.
Compare that to $129.89 in 2026.
ACA Affordability: 2026 vs. 2027
| Measure | 2026 | 2027 |
|---|
| Affordability % | 9.96% | 10.22% |
| FPL safe harbor | $129.89/mo | ~$135.92/mo |
Should you actually raise contributions to the new maximum?
Just because you can charge more doesn't mean you should. The 10.22% threshold is a legal test, not a risk-management strategy.
Push contributions to the legal max and the healthiest, lowest-claims employees are the ones who leave first. They have options: a spouse's plan, the marketplace, going without.
The employees who stay are the ones who can't afford to leave, typically older and sicker. That's adverse selection, and it doesn't show up in your budget until the renewal that breaks it.
One self-funded plan's participation dropped from 66% to 35% after years of passing every increase straight to employees. Every increase passed the affordability test and looked responsible on paper. By the time participation collapsed, the plan was too expensive to keep.
Compliant and sustainable are two different questions. Run both before you decide how much of the new 10.22% room to actually use.
What happens if your contribution isn't affordable?
The 4980H(b) penalty. It applies to every full-time employee whose coverage was unaffordable, or below minimum value, and who got a subsidized Marketplace plan instead.
For 2026, that penalty runs $5,010 per employee, per year. The IRS indexes this amount annually too. The 2027 figure hasn't been released yet.
One subsidized employee can trigger it. It doesn't take a mass failure. Is your 2027 contribution set using 10.22%, or did whoever ran the numbers just copy last year's percentage forward?
Renewal season is when this number actually bites. If you're finalizing 2027 contributions now, run the math before rates lock. Confirm your broker or TPA used 10.22%, not last year's.
That's a five-minute check against a real penalty.
Frequently asked questions
What is the ACA affordability percentage for 2027?
10.22% of an employee's household income, up from 9.96% in 2026. The IRS set the figure in Revenue Procedure 2026-26. It's the highest the affordability percentage has been since the ACA's employer mandate took effect.
Which employers does the 2027 affordability threshold apply to?
Applicable large employers, generally those with 50 or more full-time and full-time-equivalent employees in the prior year. If you're an ALE, at least one self-only plan option has to meet this threshold for every full-time employee you offer coverage to.
What are the three ACA affordability safe harbors?
The Form W-2 safe harbor, the rate-of-pay safe harbor, and the federal poverty line (FPL) safe harbor. Employers use these because they don't have access to an employee's actual household income. The FPL safe harbor is the simplest to administer. It works out to roughly $135.92 a month for 2027 calendar-year plans.
What's the penalty if my coverage isn't affordable?
The 4980H(b) penalty applies to each full-time employee whose coverage was unaffordable and who received a subsidized Marketplace plan. For 2026, that penalty is $5,010 per employee per year. The IRS indexes this amount annually. The 2027 figure hadn't been released as of this writing.
How do I track compliance deadlines like this one?
Use the Benefits Blake Compliance Calendar for personalized federal deadline reminders, or check the compliance numbers hub for verified current-year figures in one place.
The math is there. You just need someone to show you.
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