IRS Announces 2027 ACA Affordability and Premium Tax Credit Adjustments
The IRS has released new Affordable Care Act percentages that could affect employer health plan affordability and the Premium Tax Credit beginning in 2027.
The IRS has issued Revenue Procedure 2026-26, announcing updated Affordable Care Act indexing adjustments for tax and plan years beginning in 2027.
The changes affect two important areas:
The percentage used to determine whether employer-sponsored health coverage is considered affordable.
The percentages used to calculate an individual’s expected contribution toward Marketplace health insurance premiums.
Here is what employers and taxpayers should know as they begin planning for 2027.
The 2027 ACA Affordability Percentage Is 10.22%
For plan years beginning in 2027, the ACA required contribution percentage will increase to 10.22%, up from 9.96% in 2026.
This percentage helps determine whether employer-sponsored health coverage is affordable under the ACA.
In general, coverage may be considered affordable when an employee’s required contribution for the lowest-cost, self-only plan that provides minimum value does not exceed the applicable percentage of the employee’s household income.
Because employers typically do not know each employee’s household income, Applicable Large Employers may use one of three affordability safe harbors:
Form W-2 wages
Rate of pay
Federal poverty line
The IRS confirms that these safe harbors allow employers to evaluate affordability using information they already have available.
Why the Increase Matters for Employers
The higher 2027 percentage may give employers slightly more flexibility when determining how much employees can be required to contribute toward coverage while still satisfying the ACA affordability standard.
However, employers should not automatically increase employee contributions based solely on the new percentage.
Affordability calculations may depend on:
The safe harbor being used
Employee wages or hourly rates
The cost of the lowest-priced self-only coverage
Whether the plan provides minimum value
The employer’s plan-year start date
Changes in employee classifications or compensation
Employers with an average of at least 50 full-time employees, including full-time-equivalent employees, are generally considered Applicable Large Employers. These employers may face potential employer shared responsibility payments if they fail to offer qualifying coverage to eligible full-time employees.
Employers should review their 2027 plan contributions before open enrollment rather than waiting until the new plan year begins.
Updated Premium Tax Credit Percentages
Revenue Procedure 2026-26 also updates the percentages used to calculate how much eligible individuals and families are expected to contribute toward Marketplace health insurance premiums.
For 2027, the applicable percentages are:
| Household Income as a Percentage of the Federal Poverty Line | 2027 Applicable Percentage |
|---|---|
| Less than 133% | 2.15% |
| At least 133% but less than 150% | 3.23% to 4.30% |
| At least 150% but less than 200% | 4.30% to 6.78% |
| At least 200% but less than 250% | 6.78% to 8.66% |
| At least 250% but less than 300% | 8.66% to 10.22% |
| At least 300% but not more than 400% | 10.22% |
These percentages are used when calculating an individual’s Premium Tax Credit under Internal Revenue Code Section 36B.
The Premium Tax Credit is a refundable tax credit designed to help eligible individuals and families pay for health insurance purchased through the Health Insurance Marketplace.
What Individuals Should Consider
The updated percentages may affect the amount of financial assistance available for Marketplace coverage in 2027.
Taxpayers receiving advance Premium Tax Credit payments should continue to report significant income or household changes to the Marketplace. This can include:
A salary increase or job change
Marriage or divorce
The birth or adoption of a child
A change in household size
Becoming eligible for employer-sponsored coverage
Advance credit payments are reconciled when the taxpayer files Form 8962 with their federal income tax return. Differences between estimated and actual household information can affect the taxpayer’s final credit or repayment obligation.
Start Planning Before 2027
Although these adjustments do not take effect until tax and plan years beginning in 2027, employers, benefits administrators, and taxpayers should begin preparing early.
Employers should coordinate with their benefits, payroll, tax, and insurance professionals to confirm that employee contributions remain affordable under the appropriate safe harbor.
Individuals using Marketplace coverage should review projected household income and available employer coverage before selecting a 2027 plan.
The Bottom Line
The 2027 ACA affordability percentage will increase from 9.96% to 10.22%, while the Premium Tax Credit contribution percentages will also rise slightly across the applicable income ranges.
These annual adjustments may appear small, but they can affect employer compliance, employee health insurance contributions, and the amount of Marketplace assistance available to taxpayers.
Virtual CPAs can help businesses and individuals evaluate how changing tax rules may affect their planning and reporting.
This article is intended for general informational purposes only and should not be considered tax, legal, insurance, or employee-benefits advice.