Introduction
The ACA affordability percentage is an annual compliance figure. It caps how much of an employee's income you can ask them to pay for self-only coverage and still have the offer count as affordable.
For 2027, the number is 10.22%, published in Rev. Proc. 2026-26. The practical problem shows up with an ICHRA. A flat contribution that looks fine on paper can fail for one employee and pass for another, because individual-market premiums shift with age and rating area.
This article covers the official 2027 percentage, what it means for employer shared responsibility, how the calculation works, ICHRA-specific rules, and what to do before the 2027 plan year.
Key Takeaways
- The 2027 percentage is 10.22%, effective for plan years beginning in calendar year 2027.
- Group plan affordability tests the lowest-cost self-only minimum value option against income or a safe harbor.
- ICHRA affordability is employee-specific: lowest-cost silver premium in the employee's rating area, less your monthly contribution.
- Review notices, classes, documentation, and payroll before open enrollment.
What the 2027 ACA Affordability Percentage Means for Employers
The official number and its timing
The IRS set the 2027 required contribution percentage at 10.22% in Rev. Proc. 2026-26. The IRS advance release came July 21, 2026, and the Internal Revenue Bulletin followed July 27, 2026. The procedure is effective "for taxable years and plan years beginning in calendar year 2027."
That wording matters for non-calendar-year plans. Check your plan-year start date. A plan beginning in 2026 does not automatically switch to the 2027 figure on January 1.
Why it matters under Section 4980H
An applicable large employer (ALE) generally averages at least 50 full-time employees, including full-time equivalents, in the prior calendar year. Full-time means 30 hours of service weekly or 130 monthly.
If an ALE offers coverage to at least 95% of full-time employees but the offer is unaffordable for one who receives a premium tax credit (PTC), the 4980H(b) assessment can apply.
The published 2027 annualized amounts are $3,780 for 4980H(a) and $5,670 for 4980H(b), per Rev. Proc. 2026-22.
Key terms
- Minimum essential coverage (MEC): eligible employer-sponsored coverage.
- Minimum value: a plan paying at least 60% of total allowed benefit costs, with substantial inpatient hospital and physician coverage.
- Required contribution: the employee's cost for the lowest-cost self-only coverage that provides minimum value.
- Self-only coverage: coverage of one individual, generally the employee.
What the percentage does not do
The 10.22% figure sets a threshold only. It does not:
- Set your total premium cost
- Guarantee Marketplace eligibility
- Replace the minimum value test
It also is not a universal payroll deduction. The result depends on plan structure, employee status, payroll data, and the safe harbor you choose. A group plan tests the employee's share of the lowest-cost option. An ICHRA tests the premium left after your allowance.
How Employers Calculate ACA Affordability for 2027
The calculation sequence
- Identify the employee's required contribution for the lowest-cost self-only coverage that provides minimum value. Don't use a richer option or family premium.
- Apply the 10.22% threshold.
- Test the result against a safe harbor where appropriate.
The three safe harbors
| Safe harbor | How it works at 10.22% |
|---|---|
| Form W-2 | Annual contribution can't exceed 10.22% of Box 1 wages |
| Rate of pay | Hourly: 130 hours × lower of the starting or lowest monthly rate × 10.22%. Salaried: starting monthly salary × 10.22% |
| Federal poverty line | Monthly contribution no more than one-person annual FPL ÷ 12 × 10.22% |
The rate-of-pay method isn't available after salary reductions, including those caused by reduced hours. For the poverty line, use the guideline for the employee's state of employment.
The 2026 one-person figures are $15,960 (contiguous states and DC), $19,950 (Alaska), and $18,360 (Hawaii), per the HHS guidelines. These are 2026 numbers, so confirm the 2027 guideline before you test.
Illustrative example (placeholder values only)
Say an employee's W-2 Box 1 wages are $30,000 for the year. The cap is $30,000 × 10.22% = $3,066 annually, or $255.50 monthly.
A required contribution of $200 monthly passes under this safe harbor. A $300 contribution fails. These figures are hypothetical and don't reflect any real plan.
Hours, leave, and status changes
- Hourly-rate cuts and reduced hours can break the rate-of-pay safe harbor.
- FMLA, USERRA, and jury-duty leave get special averaging treatment under the look-back method, not the monthly method.
- Look-back measurement periods can run up to 12 months, with stability periods of at least six months.
- Waiting periods and midyear eligibility changes need documentation.
Questions to confirm with an adviser
- How are employees classified as full-time?
- Which safe harbor fits each employee group?
- How does a non-calendar-year plan apply the percentage?
- What measurement periods apply?
- What reporting obligations follow?
What a wrong calculation costs
Errors can mean 4980H(b) exposure, incorrect employee notices, and confusion over PTC eligibility. Excess advance PTC payments must be repaid with the employee's federal income tax return, so a bad affordability message can land on the employee too.
How the 2027 ACA Affordability Percentage Applies to an ICHRA
An ICHRA is an employer-funded arrangement that reimburses individual health insurance premiums and other eligible medical expenses. Employers could begin offering them January 1, 2020, under the 2019 final rule. No separate 2027 ICHRA percentage exists, so the general 10.22% applies.
The ICHRA affordability test
Run the test in three steps:
- Take the lowest-cost self-only silver Exchange premium in the employee's residential rating area.
- Subtract your monthly self-only ICHRA amount.
- Compare what's left with household income × the applicable percentage ÷ 12.
Use the lowest-cost silver plan, not the second-lowest-cost benchmark.
Your contribution is not automatically affordable because it's large or identical for everyone. What counts is the employee's remaining premium.
CMS publishes 2027 employer lowest-cost silver lookup data for HealthCare.gov states, which helps with employee-specific comparisons.
Illustrative comparison (hypothetical values)
Suppose you give two employees the same $400 monthly ICHRA.
- Employee A, age 27, lives in a low-cost rating area. Lowest-cost silver: $350. Remaining cost: $0.
- Employee B, age 58, lives in a high-cost rating area. Lowest-cost silver: $900. Remaining cost: $500.
Same allowance, different results. Employee B's $500 must be measured against the threshold for that person. These numbers are invented to show the mechanics.
Premium tax credit effects
- Affordable offer: no PTC, even if the employee opts out.
- Unaffordable offer: the employee can opt out and seek a PTC, subject to other rules.
- Accepting the ICHRA: blocks PTC eligibility regardless of affordability.
Notices, classes, and design
Notices generally go out 90 calendar days before the plan year. Newly eligible employees get theirs no later than their first coverage day. Each notice should cover:
- Contribution amount
- Dependent eligibility
- Effective dates
- Individual coverage requirements
- PTC consequences
CMS lists 11 permitted employee classes, including full-time, part-time, salaried, and geographic location. Terms are generally uniform within a class, though age-based contribution variation is allowed (the oldest participant's maximum can't exceed three times the youngest's).
Minimum class sizes apply to certain splits. You can't offer an employee a choice between a group plan and an ICHRA.
Adoption is growing. The HRA Council's 2026 data report shows 34% growth among its conservative cohort, though that reflects participating administrators, not a national census.
2027 Employer Checklist for Group Plans and ICHRA
Before implementation
- Confirm the 10.22% figure and your plan-year effective date.
- Verify employee eligibility and classes.
- Choose an affordability safe harbor.
- Confirm MEC and minimum value.
- Pull individual-market premium data for each rating area.
- Align payroll deductions with your testing.
Documentation and administration
- Keep affordability calculations, plan documents, and classifications.
- Save Marketplace or carrier data, notices, and election records.
- Log plan-year changes.
- Retain ACA reporting records for at least three years from the return due date.
- For an ICHRA, substantiate individual coverage for each month reimbursed.
Coordinate before open enrollment
HR, payroll, finance, administrators, carriers, and employees should work from one set of numbers. The contribution shown in employee materials must match what you used for compliance testing.
Marketplace open enrollment for 2027 coverage runs November 1, 2026 to January 15, 2027, so employees will compare options during that window.
Where Muneris Benefits fits
Muneris Benefits, an independent brokerage with offices in Roanoke and Narrows, Virginia, helps employers compare benefit options, design creative plans, and keep up with changing federal and state requirements. Account managers are available daily for billing, claims, benefits, and contract questions. This is benefits guidance, not legal or tax advice.
Final reminder
Verify the final 2027 rules before making any affordability representation to employees. Have legal or tax counsel review employer-specific questions.
Frequently Asked Questions
What is the 2027 ACA affordability percentage?
It is 10.22% under Rev. Proc. 2026-26, effective for plan years beginning in calendar year 2027. It limits the employee's required contribution for an affordable offer. Confirm your plan-year start date.
Does an ICHRA count as affordable coverage for the ACA employer mandate?
It can, when the employee-specific calculation and other ACA conditions are met. You still need to review minimum essential coverage, minimum value, reporting, and employee eligibility.
How is ICHRA affordability calculated?
Subtract your monthly ICHRA contribution from the lowest-cost self-only silver premium in the employee's rating area, then compare the remainder with the threshold. Location and age change the result.
Can an affordable ICHRA affect an employee's Marketplace premium tax credit?
Yes. An affordable offer blocks the PTC even if the employee declines it. Employees should review the ICHRA notice and Marketplace determination before accepting or declining.
Should high earners use a Roth 401(k) or traditional?
That's a retirement tax question unrelated to ACA affordability. It depends on current and expected future tax rates, cash flow, and retirement goals. Consult a qualified tax or financial adviser.
Can I still contribute to a Roth IRA if I make $200,000?
It depends on modified adjusted gross income, filing status, and the tax year's limits. For 2026, single filers phase out at $153,000 to $168,000 and joint filers at $242,000 to $252,000; Roth 401(k) contributions have no income limit. Check current IRS guidance or a tax professional.
