2027 ACA Shared Responsibility Penalty Amounts Released by the IRS

The Internal Revenue Service (IRS) has officially released the indexed employer shared responsibility payment (ESRP) penalty amounts for the 2027 calendar year. Outlined in Revenue Procedure 2026-22, these updated figures provide Applicable Large Employers (ALEs) with critical targets to evaluate their upcoming benefits strategies, manage their compliance risk, and help avoid costly liabilities.

While the IRS has established the 2027 penalty thresholds, it is important to note that the 2027 ACA affordability percentage has not yet been released. Employers will need to keep a close eye out for that number later this year to help ensure their plan contributions remain within safe harbor limits.

Here is a breakdown of what the newly indexed numbers could mean for your organization.

The 2027 ACA Penalty Thresholds

Under Section 4980H of the Internal Revenue Code, the IRS assesses financial penalties against ALEs that fail to offer minimum essential coverage (MEC) that is affordable and provides minimum value to full-time employees. The original statutory baseline penalties of $2,000 and $3,000 are adjusted annually using the premium adjustment percentage published each year by the Department of Health and Human Services (HHS).

For the 2027 calendar year, HHS used National Health Expenditure Accounts (NHEA) data to determine an applicable premium adjustment percentage of 1.8916224814. Per statutory rules, when the resulting penalty increases are not a multiple of $10, they are rounded down to the next lowest multiple of $10.

Applying this formula, the official penalties for 2027 will increase to:

• Section 4980H(a) Penalty (The "Sledgehammer" Penalty)

  • 2027 Annualized Amount:  $3,780 per employee (Up from $3,340 in 2026)

    • Monthly Rate:  $315 per employee

      • How it's calculated:  $2,000 × 1.8916224814 = $3,783.24, rounded down to the next lowest multiple of $10.

         

    • Section 4980H(b) Penalty (The "Tackhammer" Penalty)
      • 2027 Annualized Amount: $5,670 per impacted employee (Up from $5,010 in 2026)
      • Monthly Rate: $472.50 per impacted employee
      • How it's calculated: $3,000 × 1.8916224814 = $5,674.86, rounded down to the next lowest multiple of $10.

    Breaking Down the Impact: What This Means for Employers

    These penalties are assessed on a monthly basis, meaning the costs can accumulate rapidly for unprepared organizations.

    1. Section 4980H(a) Penalty: Failure to Offer Coverage

    This penalty is triggered if an ALE fails to offer Minimum Essential Coverage (MEC) to at least 95% of its full-time workforce (and their dependents) in any given month, and at least one full-time employee receives a premium tax credit (PTC) through a public Health Insurance Marketplace.

    • Why it's a "sledgehammer": This penalty does not just apply to the employees who went to the marketplace; it is multiplied across all full-time employees across the entire organization (minus an allowable exclusion of the first 30 employees).

    • The 2027 Cost: At $3,780 per employee per year (or $315 per month), a firm with 500 full-time employees that misses the 95% threshold could face an annualized penalty of over $1.77 million.

    2. Section 4980H(b) Penalty: Failure to Offer Affordable, Minimum Value Coverage

    If an employer satisfies the 95% offer threshold required under 4980H(a), they can still face a penalty under Section 4980H(b) for individual instances where coverage falls short. This occurs if the plan offered is unaffordable, fails to provide minimum value, or if a specific full-time employee was omitted from the offer.

    • How it's calculated: Unlike the "a" penalty, the 4980H(b) assessment applies only to the specific full-time employees who were not offered coverage, or reject the employer's unaffordable plan or plan not providing minimum value, enroll in marketplace coverage, and receive a premium tax credit.

    • The 2027 Cost: This penalty will cost employers $5,670 per impacted employee per year (or $472.50 per month). Note: The total 4980H(b) assessment is capped monthly at the maximum amount the employer would have owed under 4980H(a).

    Effective Dates & Next Steps for Employers

    Revenue Procedure 2026-22 clarifies that these indexed penalty amounts are effective for taxable years and plan years beginning after December 31, 2026.

    With baseline penalties reaching historic highs, the margin for error in your benefits administration has never been smaller. To help protect your organization ahead of the 2027 plan year, employers should prioritize the following actions:

    • Anticipate the Affordability Thresholds: Because the 2027 affordability percentage has not yet been announced, closely monitor your contribution structures. A rise in penalty amounts means that failing the affordability test on even a handful of employees could carry a heavier financial sting.

    • Audit Employee Hours Continuously: Help ensure your measurement periods accurately identify full-time status, particularly for variable-hour, seasonal, or part-time staff whose hours fluctuate.

    • Keep Thorough Offer Records: Build a defensible audit trail. Documenting each offer of coverage—including employee waivers—is one of your first and strongest lines of defense if you receive an IRS Letter 226-J penalty assessment.

    How Equifax Can Help

    Equifax offers a more comprehensive ACA solution, including affordability calculations, reporting, and dedicated ACA subject matter experts. We can help you navigate the intricacies of ACA and help ensure you're better prepared now and for the 2027 plan year.

    Contact us today to learn more. You can also help calculate your ACA potential penalty risk by using our ACA Potential Penalty Calculator.

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