Affordable Care Act Management August 25, 2026

2027 ACA Affordability Rises to 10.22%: Safe Harbor Update

The IRS recently announced the 2027 Affordable Care Act (ACA) affordability percentage, increasing to 10.22% of an employee's household income for 2027 (up from 9.96% in 2026).

The affordability percentage determines whether an employer-sponsored health plan qualifies as affordable under the ACA. If coverage is not considered affordable, eligible employees may qualify for a premium tax credit when purchasing coverage through an exchange, which can trigger employer penalties. This update can directly impact health plan design and cost-sharing strategy for the upcoming plan year.

Why the Timing Matters

This announcement comes at a critical time for employers evaluating open enrollment strategies and premium contribution structures for the 2027 calendar year. If your organization operates on a January 1 plan year, monthly contribution limits change, and proactive planning is required to help avoid costly Section 4980H penalties.

Employers need to review their health plan options and adjust employee cost-sharing to help meet regulatory requirements and help manage penalty risks.

Decoding Affordability Safe Harbors

Because employers rarely know an employee’s total household income, the IRS allows employers to use one of three affordability safe harbors:

1. Federal Poverty Line (FPL) Safe Harbor

The FPL safe harbor is typically the simplest to administer.* To qualify, an employer’s required employee contribution for the lowest-cost, self-only coverage that provides minimum value cannot exceed 10.22% of the FPL for the applicable location.

For 2027, the maximum monthly employee contribution limits under the FPL safe harbor (for a 1/1 plan year) are:*

U.S. Mainland: $135.93 per month
Hawaii: $156.37 per month
Alaska: $169.91 per month

2. Rate of Pay Safe Harbor

Under this safe harbor, affordability is calculated by taking 10.22% of an hourly employee’s rate of pay multiplied by 130 hours per month (or 10.22% of a salaried employee’s monthly salary).*

3. Form W-2 Safe Harbor

This method determines affordability based on 10.22% of the employee’s Form W-2, Box 1 wages for the calendar year.*

Choosing the Right Safe Harbor: Pros and Cons

Each safe harbor offers specific operational advantages depending on your workforce structure:

Safe Harbor	Key Advantages	Considerations
Federal Poverty Line (FPL)	Easier to calculate; sets a uniform dollar cap across your workforce.	Can result in the lowest allowable monthly employee contribution limit.
Rate of Pay	Ideal for hourly workers with fluctuating hours; allows higher employee contributions for higher earners.	Requires tracking wage changes throughout the year; less suitable if hourly wages decrease.
Form W-2	Directly reflects individual earnings and accommodates higher contribution amounts for salaried staff.	Box 1 wages are not finalized until year-end. Variable hours, unpaid leave, or pre-tax deductions can unexpectedly lower Box 1 income and lead to affordability issues.

If your lowest-cost self-only coverage exceeds the FPL limits, locking in your Rate of Pay or Form W-2 Box 1 safe harbor calculations early can be essential.

Helping Stay Ahead

Navigating ACA requirements requires ongoing attention as regulatory benchmarks shift. Evaluating your health plan contribution model now helps better protect both your employees' health coverage options and your organization’s bottom line.

How Equifax Can Help

Equifax provides more comprehensive ACA management support, including automated affordability tracking, Form 1095-C and Form 1094-C reporting, and information from dedicated ACA subject matter experts. We can help your team streamline regulatory reporting and help reduce regulatory risks for the 2027 plan year.

*Source: Internal Revenue Service (IRS): https://www.irs.gov/pub/irs-drop/rp-26-26.pdf

The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel. Equifax provides services that can help employers reduce their compliance risks. Details on our provision of these services and related support will be contained in your services agreement. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.

About the Author

Christy Abend

Job Title: Director, Product Management

Christy Abend has more than two decades working in the human resources and product management space, with a concentration in health and welfare benefits and a focus on employer regulatory alignment. Her background and interests facilitate her work on the ACA products offered by Equifax Workforce Solutions. She has a Bachelor of Science degree with a concentration in Human Resource Management from the State University of New York, Empire State College and also holds a SHRM-SCP certification as well as a Group Benefits Associate designation awarded by the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania.