Are You Prepared to Pay or Play? What the 2027 ACA Affordability Percentage Means for Employers

Each year, the IRS determines what qualifies employer-sponsored health plans as “affordable” under the Affordable Care Act (ACA). Last week, the IRS announced that for plan years beginning 2027, the affordability threshold will increase to 10.22% for applicable large employers (ALEs).

What does this mean for employers? 

Under the ACA’s “pay-or-play” rules for plans beginning in 2027, health coverage is considered affordable if the employee’s contribution for individual coverage does not exceed 10.22% of their annual household income or 10.22% using an ACA affordability safe harbor.

Each year, this percentage is adjusted based on health plan premium growth rates in relation to income growth rates.

An increase from the 2026 ACA percentage of 9.96%, this means that ALEs may be able to increase employee contributions while still meeting the ACA’s affordability requirement and avoiding pay-or-play penalties. The increased affordability threshold offers an opportunity for employers to reevaluate their employee contribution strategies for plan years beginning in 2027.

How can I prepare for 2027 today?

Taking a proactive approach to ACA compliance helps reduce the risk of costly IRS penalties. With 2027 around the corner, ALEs should: 

• Consider the 2027 affordability percentage of 10.22% when developing your health plan contribution strategies for the 2027 plan year
• Utilize the affordability safe harbors to calculate affordability if you don’t have access to employees’ household income data
• Analyze for any potential exposures to pay-or-play penalties

Take ACA Compliance a Step Further

It might seem simple in theory – use the new percentage to calculate next year’s employee contributions – but on paper, things can get a little trickier.

If you want an extra set of eyes on your organization’s Affordable Care Act compliance strategy, reach out to GKG’s team of ACA Advisors today, whose expertise range from program development, to reporting, to staff training, data reconciliation and more.

Click here to inquire and learn more or reach out directly below to one of GKG’s ACA experts.