ACA Affordability Rises to 10.22% for 2027: What Employers Should Recalculate Before Open Enrollment

The Affordable Care Act affordability percentage will increase to 10.22% for plan years beginning in 2027, according to Revenue Procedure 2026-26.

This is the third consecutive annual increase, following thresholds of 9.96% for 2026, 9.02% for 2025, and 8.39% for 2024. The higher percentage gives employers more flexibility to allocate health plan costs to employees while maintaining an affordability safe harbor.

That flexibility should be evaluated alongside workforce compensation, plan design, payroll deductions, and the employer’s selected safe harbor before 2027 contribution rates are finalized.

What the 10.22% threshold controls

The ACA employer shared responsibility provisions generally apply to Applicable Large Employers, or ALEs. An employer is typically an ALE for a calendar year when it averaged at least 50 full-time employees, including full-time-equivalent employees, during the preceding calendar year.

ALEs may face an Employer Shared Responsibility Payment when they fail to offer qualifying coverage or when a full-time employee receives a premium tax credit after being offered coverage that was unaffordable or did not provide minimum value.

For the employer affordability safe harbors, the calculation generally uses the employee contribution for the lowest-cost self-only option that provides minimum value.

A separate rule applies when determining premium tax credit eligibility for an employee’s spouse or dependents. Under current rules, affordability for those family members is based on the cost of covering the employee and the applicable family members, not solely the employee-only premium. A premium tax credit received only by a spouse or dependent does not, by itself, trigger an employer shared responsibility payment.

How the three affordability safe harbors work

Because employers generally do not know each employee’s household income, the IRS affordability rules permit ALEs to use one of three safe harbors:

Federal poverty line safe harbor: Compares the employee’s monthly contribution with the applicable federal poverty guideline for one person.
Rate of pay safe harbor: For hourly employees, generally uses 130 hours multiplied by the applicable hourly rate. For salaried employees, it generally uses a monthly salary.
Form W-2 safe harbor: Compares the annual employee contribution with Box 1 wages reported on Form W-2.

An employer may use different safe harbors for reasonable employee categories, such as hourly and salaried employees or workers in different geographic locations. The selected method must be applied uniformly and consistently within each category.

The Form W-2 method can be less predictable because affordability is confirmed after year-end using actual Box 1 wages. The rate of pay method may provide better visibility during enrollment planning, but wage reductions can change the calculation. The federal poverty line method offers a fixed contribution ceiling and is often the simplest method to administer.

The 2027 federal poverty line contribution cap

For a calendar-year 2027 plan using the federal poverty line safe harbor, the 2026 poverty guideline for one person in the 48 contiguous states and Washington, D.C. is $15,960.

The monthly calculation is:

$15,960 × 10.22% ÷ 12 = $135.926

Because the employee contribution may not exceed the calculated amount, employers using a strict cents-based limit should set the employee-only monthly premium at $135.92 or less.

Different federal poverty guidelines apply in Alaska and Hawaii. Non-calendar-year plans should also confirm which guideline may be used. The regulations generally allow an employer to select a poverty guideline that was in effect within six months before the first day of the plan year.

What employers should review before open enrollment

The higher threshold does not automatically mean employee premiums should increase to the maximum permitted amount. Employers should coordinate the affordability analysis with their benefits strategy, compensation structure, and employee retention priorities.

Before finalizing 2027 rates, employers should:

Identify the lowest-cost self-only plan that provides minimum value for each eligible employee category.
Model all three safe harbors using current payroll and workforce data.
Test lower-paid, variable-hour, part-year, and geographically dispersed employee populations.
Review how wellness incentives, health reimbursement arrangements, flex credits, and opt-out payments affect the required employee contribution.
Document the selected methodology and coordinate it with Forms 1094-C and 1095-C reporting.

Employers should leave time to correct contribution structures before enrollment materials and payroll configurations are finalized.

How Aura Advisors can help with ACA affordability planning

The 10.22% threshold gives employers additional room to structure 2027 health plan contributions, but the most favorable safe harbor will depend on the employer’s workforce and compensation data.

Aura Advisors can help employers model the federal poverty line, rate of pay, and Form W-2 safe harbors; identify employee groups that may fall outside the intended affordability range; and coordinate the selected approach with payroll and ACA reporting. A documented analysis completed before enrollment can reduce assessment exposure while preserving flexibility in the employer’s overall benefits strategy.

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