ACA affordability rises to 10.22% for 2027: what employers need to know

Key takeaways

• Employer-sponsored coverage is affordable for 2027 plan years if an employee’s required contribution for self-only coverage is no more than 10.22% of household income.
• That is up from 9.96% for 2026, and it is the highest the percentage has ever been.
• Applicable large employers may be able to raise employee contributions for 2027 and still meet the affordability standard.
• Separately, the U.S. Department of Labor has proposed a new safe harbor for delivering group health plan disclosures electronically.
• The proposed delivery rule is not final. Current disclosure requirements still apply.

What is the ACA affordability percentage for 2027?

It is 10.22%. On July 21, 2026, the IRS released Revenue Procedure 2026-26, which sets the contribution percentage used to determine whether an employer’s health plan is affordable under the Affordable Care Act (ACA).

For plan years beginning in 2027, employer-sponsored coverage counts as affordable under the ACA’s pay-or-play rules if an employee’s required contribution for self-only coverage does not exceed 10.22% of their household income for the year. That is an increase from 9.96% for 2026, and the highest the percentage has been.

For applicable large employers (ALEs), the practical effect is real money. A higher percentage means you may be able to raise what employees contribute toward coverage in 2027 and still meet the affordability standard. Build that into your contribution strategy now, while there is still time to model it.

How the pay-or-play affordability rules work

The ACA’s pay-or-play rules require ALEs to offer affordable, minimum-value health coverage to their full-time employees and dependents, or risk a penalty. Whether coverage is affordable is central to whether a penalty applies.

Coverage is affordable if an employee’s required contribution does not exceed 9.5% of household income, as adjusted each year. The 10.22% figure for 2027 is that baseline after indexing.

There is a practical problem built into the rule: employers generally do not know what an employee’s household income is. To solve it, the IRS offers three optional safe harbors that let ALEs measure affordability against information they do have.

• The Form W-2 safe harbor, based on the employee’s W-2 wages.
• The rate of pay safe harbor, based on the employee’s hourly rate or monthly salary.
• The federal poverty level safe harbor, based on the federal poverty line for a single individual.

DOL proposes new electronic delivery options for group health plans

On July 23, 2026, the U.S. Department of Labor (DOL) proposed a rule creating a new safe harbor for group health plan administrators who want to deliver plan disclosures electronically. The disclosures in question are those required under the Employee Retirement Income Security Act (ERISA), and the goal is to cut administrative work while making plan information easier for participants to find and understand.

To use the safe harbor, plan administrators would need to do four things:

• Send an initial notice to each covered individual that identifies the electronic address to be used, explains how to get to the documents, and describes the right to opt out and request free paper copies.
• Provide a notice of internet availability for each covered document, telling covered individuals about their paper copy and opt-out rights.
• Set up and maintain a website where covered individuals can get the documents, with reasonable steps to meet the standards for timing, presentation, and confidentiality.
• Provide a free paper copy of any covered document promptly on request.

One notable limit: the proposed safe harbor does not allow email delivery. Many ERISA group health plan disclosures contain sensitive information, including protected health information, and email is not considered a safe enough channel for it.

Nothing changes yet. Until the rule is finalized, plan administrators should keep following the disclosure requirements already in place.

Frequently asked questions

What is the ACA affordability percentage for 2027? 10.22% of household income. The IRS set the figure in Revenue Procedure 2026-26, released July 21, 2026, and it applies to plan years beginning in 2027.

How does the 2027 percentage compare to 2026? It is higher. The 2026 percentage was 9.96%, so 10.22% for 2027 is an increase and the highest the affordability percentage has ever been.

Can employers raise employee contributions for 2027? Possibly. Because the affordability threshold rose, applicable large employers may be able to increase what employees pay for self-only coverage and still meet the standard. Model it against your own plan before deciding.

What are the three ACA affordability safe harbors? The Form W-2 safe harbor, the rate of pay safe harbor, and the federal poverty level safe harbor. Each lets an employer measure affordability using information it already has, instead of household income.

Can group health plan disclosures be sent by email? Not under the proposed safe harbor. The DOL excluded email because many ERISA group health plan disclosures contain sensitive information, including protected health information.

The Bright Side

A new affordability percentage is not just a number to file away. It is a chance to rethink your contribution strategy before 2027 rates are set. Daybright helps employers run that math against their own plan and stay ahead of the compliance calendar, through one partner for Employee Benefits, Retirement, Compliance, and Individual Financial Planning. Want help modeling what 10.22% means for your 2027 contributions? Contact us

The information in this article is intended for informational use only and should not be construed as professional advice.

Source: Adapted from Zywave content. © 2026 Zywave, Inc. All rights reserved.

This post is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. Content sourced from Zywave.

• Category: News
• Tag: Employee Benefits