On July 21, 2026, the IRS published Revenue Procedure 2026-26, which announces the ACA affordability percentage (also termed the required contribution percentage) for medical plan years beginning in 2027.
Under the ACA employer-shared responsibility rules, an applicable large employer (ALE) must provide affordable, minimum-value medical coverage to its full-time employees or risk penalties. ALE status generally applies to employers with at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year. The required contribution percentage is used to determine whether an ALE’s health plan offers affordable coverage. This percentage is adjusted for inflation each year.
In 2027, the ACA's affordability percentage will increase to 10.22% from 9.96% (for 2026). For the employer mandate and affordability, this means that an employee’s required premium contribution toward the employer’s lowest-cost single-only coverage can be no more than 10.22% of the federal poverty line (FPL) or an employee’s W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying on). If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option that also meets minimum value. For 2027 calendar year plans, the maximum employee premium contribution for the lowest-cost self-only coverage that will satisfy the FPL affordability safe harbor will increase to $135.92 per month from $129.89 per month in 2026 for the mainland U.S. Higher monthly employee premium amounts may be available under the rate of pay and Form W-2 safe harbors, which rely on actual employee earnings.
If the employer offers a non-calendar year plan, the employer will use the affordability percentage in effect at the beginning of the non-calendar plan year. For example, if a plan year begins on November 1, 2026, the applicable affordability percentage for that entire plan year is 9.96%. The employer will begin to use 10.22% on November 1, 2027, for the following non-calendar plan year. The maximum employee premium contribution to satisfy the FPL affordability safe harbor may differ for certain non-calendar-year plans that use the 2027 FPL, which is typically released in January or February, to calculate this amount.
The guidance also includes the 2027 premium tax credit (PTC) table used to determine an individual’s eligibility for the PTC and, if eligible, the maximum amount the individual must pay for their premiums, with the remainder covered by the PTC. Employees who are offered affordable minimum value coverage by their employers are not eligible for the PTC.
Employer Takeaway
ALEs should be aware of the increased 2027 affordability percentage when setting employee premium contribution rates for the 2027 plan year. These employers should review 2027 contribution strategies well in advance of open enrollment and confirm which affordability safe harbor will be used. Employers should also coordinate with payroll, benefits administration and reporting vendors to ensure updated employee contribution rates are accurately reflected.
ALEs that fail to satisfy the affordability requirement may be subject to potential employer-shared responsibility penalties. For the updated penalty amounts, please see the article, ACA Employer Mandate Penalties Increase for 2027, in the May 5, 2026, edition of Compliance Corner. For further information on ACA affordability requirements, please ask your broker or consultant for a copy of the NFP publications ACA: Employer Mandate Penalties and Affordability and Cost-Share Contribution Models: A Guide for Employers.
Review IRS Revenue Procedure 2026-26 for additional details.