The IRS recently issued Revenue Procedure 2026-26 announcing the 2027 affordability threshold (contribution percentage) for determining the affordability of employer-sponsored health plans under the Affordable Care Act (ACA).    

Background:  

The ACA’s “pay or play” rules require applicable large employers (ALEs) – those with 50 or more full-time equivalent employees – to offer affordable, minimum-value health coverage to their full-time employees (and dependents).  ALEs that do not meet these requirements may owe an employer shared responsibility penalty.    

2027 Affordability Threshold:  

For plan years beginning in 2027, coverage will be considered affordable if the employee’s required contribution for self-only coverage under the lowest-cost, minimum value plan option does not exceed 10.22% of their household income for the calendar year.  The current 2026 affordability threshold is 9.96%.  

Because employers generally do not know the household income of their employees, the following safe harbor options may be used instead:  

• Box 1, W-2: The employee’s Box 1, W-2 earnings × 10.22%  

• Rate of Pay: The employee’s base hourly rate (hourly employees) x 130 hours x 10.22% or (salaried employees) monthly salary ÷ 12 × 10.22%  

• Federal Poverty Level (FPL): FPL amount in effect within 6 months before the start of the plan year x 10.22% 

For 2026, the FPL is $15,960. For plan years beginning on January 1, 2027, coverage will be affordable under this safe harbor if the employee contribution does not exceed $135.92 per month ($15,960 ÷ 12 × 10.22%). 

Your Piper Jordan account team is available to answer questions and can assist in reviewing 2027 health plan offerings and contribution structures to ensure they meet the updated affordability threshold.   

Additional Information:  

More information about ACA provisions is available at:  Affordable Care Act – Employer Information Page  

Information contained in this email is intended for general information purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Recipients are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise.