As employers work through health plan renewals and budgets for 2027, there is a new number that deserves a place on the planning checklist: 10.22%.
That is the Affordable Care Act’s affordability percentage for plan years beginning in 2027. It is up from 9.96% for 2026 and represents the percentage used to determine whether employer-sponsored health coverage is considered affordable under the ACA.
At first glance, a change of just over a quarter of a percentage point may not seem especially significant. But for employers balancing rising healthcare costs, employee contributions and compliance requirements, even a modest adjustment can affect how contribution strategies are structured for the coming year.
What Is Changing?
Under the ACA’s employer shared responsibility provisions, Applicable Large Employers generally must offer full-time employees health coverage that is affordable and provides minimum value or potentially face penalties.
For plan years beginning in 2027, coverage generally satisfies the ACA affordability standard when the employee’s required contribution for the lowest-cost self-only coverage providing minimum value does not exceed 10.22% of the applicable income measure.
The 2027 percentage is an increase from the 9.96% threshold that applies to plan years beginning in 2026.
Because most employers do not know an employee’s total household income, the ACA provides three affordability safe harbors that employers may use:
- Federal Poverty Line Safe Harbor
- Rate of Pay Safe Harbor
- Form W-2 Safe Harbor
Each provides a different way to determine whether an employer’s contribution strategy meets the ACA affordability requirement.
📌 2027 ACA Affordability at a Glance
- 2026 affordability percentage: 9.96%
- 2027 affordability percentage: 10.22%
- The new percentage applies to plan years beginning in 2027
- Affordability generally focuses on the employee cost for the lowest-cost self-only plan that provides minimum value
- Employers may use one of three ACA affordability safe harbors
- The change gives employers somewhat more flexibility when establishing employee contributions, but affordability should still be tested before 2027 rates are finalized
What Does the Higher Percentage Mean for Employers?
In practical terms, the increase to 10.22% gives employers slightly more room when determining how much employees may be required to contribute toward coverage while remaining within the ACA affordability standard.
That could be helpful in a year when healthcare costs are again expected to rise significantly.
But employers should be careful not to look at the percentage in isolation. An employee contribution that meets the affordability requirement for one group of employees may not necessarily work for another, depending on the safe harbor being used and the employees’ compensation.
That is why affordability testing should be part of the contribution-setting process rather than something reviewed after rates have already been communicated.
For organizations already evaluating their overall 2027 benefits strategy, MSI’s Benefits Consulting team works with employers to examine plan design, renewal options and contribution strategies together rather than treating each as a separate decision.
The Federal Poverty Line Safe Harbor Offers a Useful Benchmark
For employers using the Federal Poverty Line safe harbor, the calculation can be particularly straightforward.
For calendar-year plans beginning January 1, 2027, the 10.22% affordability percentage combined with the applicable federal poverty level produces a maximum employee contribution of approximately $135.93 per month for the lowest-cost self-only plan providing minimum value in the contiguous United States.
That figure can provide employers with a useful benchmark when evaluating 2027 employee contribution levels.
The other two safe harbors work differently.
The Rate of Pay safe harbor bases affordability on an employee’s hourly rate or monthly salary, subject to specific rules. The Form W-2 safe harbor uses an employee’s Box 1 W-2 wages.
The right approach can depend on an employer’s workforce, compensation structure and administrative practices. Employers should also apply their chosen methodology consistently within permitted employee categories.
Calendar-Year and Non-Calendar-Year Plans Need to Watch the Timing
There is another detail that can easily get lost in the numbers: the affordability percentage is tied to the plan year, not simply the calendar year.
A plan beginning January 1, 2027 will use the new 10.22% figure.
A non-calendar-year plan that began during 2026, however, generally continues using the 2026 affordability percentage until that plan year ends. The 10.22% figure then applies when the next plan year begins in 2027.
For employers with non-calendar-year plans, that distinction makes it especially important to confirm which percentage applies before changing employee contributions.
Why Affordability Still Matters
The annual affordability calculation is more than an administrative exercise.
Applicable Large Employers that fail to offer affordable coverage providing minimum value can potentially become subject to an employer shared responsibility payment if a full-time employee obtains subsidized coverage through the Health Insurance Marketplace.
The IRS also continues to use employer reporting to administer these requirements, making accurate plan design, contribution calculations and ACA reporting an important part of an employer’s overall compliance process.
Employers can review the official 2027 adjustment in IRS Revenue Procedure 2026-26.
What Employers Should Review Now
For employers already planning 2027 benefits, now is a good time to look at affordability alongside renewal projections rather than waiting until open enrollment is underway.
Start by confirming which medical plan represents the lowest-cost self-only option providing minimum value. Then review the employee contribution required for that coverage and determine which affordability safe harbor the organization intends to use.
Employers should also consider whether changes in wages, employee classifications or contribution structures could affect the calculation for different groups of employees.
Finally, make sure that benefits, payroll and HR data tell the same story. A compliant contribution strategy still needs to be implemented correctly and reflected accurately in ACA reporting.
MSI’s Administrative Support services include regulatory compliance assistance and 1094/1095 reporting support, helping employers manage these requirements as part of the broader administration of their benefits programs.
A Small Percentage Change Worth Paying Attention To
The move from 9.96% to 10.22% will not dramatically reshape an employer’s health plan on its own. What it does provide is another piece of the puzzle as organizations decide how to absorb rising healthcare costs and how much of those costs employees will be asked to share.
The best time to run the numbers is before those decisions are locked in.
As employers prepare for 2027, affordability testing should sit alongside renewal analysis, plan design and budgeting. Reviewing those pieces together can help avoid compliance surprises while creating a contribution strategy that works for both the organization and its employees.
MSI Benefits Group can help employers evaluate 2027 plan options, employee contribution strategies and ACA compliance requirements before renewal decisions are finalized. Contact the MSI team to discuss how the new affordability threshold may affect your organization.