Planning Ahead: What the 2027 ACA Affordability Rate Means for Employers
As employers prepare their health plans and budgets for 2027, an updated Affordable Care Act (ACA) affordability rate deserves attention. The Internal Revenue Service has announced that the ACA affordability percentage will increase to 10.22% for plan years beginning in 2027, up from 9.96% in 2026.
The percentage helps determine how much an employee may be required to contribute toward employer-sponsored health coverage for that coverage to be considered affordable under the ACA. Although the higher rate gives employers slightly more flexibility, it also provides an important reason to review employee contribution amounts before the next plan year.
Which Employers Are Affected?
The affordability requirement applies to Applicable Large Employers (ALEs). Per IRS guidance, an organization is generally considered an ALE if it averaged at least 50 full-time employees, including full-time equivalent employees, during the previous calendar year.
Employers that qualify as ALEs generally must offer affordable health coverage that provides minimum value to their full-time employees and make coverage available to their dependents. If an employer does not meet these requirements, it may face an IRS penalty when at least one full-time employee receives a premium tax credit through the health insurance marketplace.
What Does the New Rate Mean?
For plan years beginning in 2027, an employee’s required contribution for the lowest-cost self-only plan that provides minimum value generally cannot exceed 10.22% of the employee’s household income.
Because employers usually do not know an employee’s total household income, the IRS allows them to use one of three affordability safe harbors instead:
Form W-2 wages
The employee’s rate of pay
The federal poverty line
The new percentage does not necessarily mean that every employer needs to change its employee contribution levels. However, employers should review the cost of their lowest-priced self-only plan and work with their benefits, payroll, tax and legal professionals to confirm that their 2027 coverage meets applicable requirements. Employers can find more information about these requirements in guidance provided by the IRS.
How Can Employers Prepare?
Preparing for a new plan year involves more than setting contribution levels. Employers also need to keep eligibility, enrollment and payroll information accurate while making sure employees understand their coverage and know where to turn with questions.
As a trusted third-party administrator, PacFed helps coordinate these moving parts so benefits administration runs more smoothly. By supporting employers throughout the enrollment process and providing employees with clear, accessible guidance, PacFed helps reduce confusion and create a better benefits experience for everyone.
Starting early gives employers time to review details, communicate changes clearly and prepare for a more seamless transition into the 2027 plan year.
Make us part of your team
When you’re ready to simplify employee benefits administration and provide a more supportive experience for your employees, PacFed is here to help. Call 800.753.0222 to start the conversation. We’d love to hear from you.
Pacific Federal is a Zenith American company and subsidiary of Harbour Benefit Holdings, Inc.
