What is the ACA affordability percentage for 2027?

As confirmed in IRS Revenue Procedure 2026-26, the ACA affordability threshold for plan years beginning in 2027 is 10.22%, up from 9.96% in 2026.

How do you calculate ACA affordability for 2027?

Multiply the applicable income or wage measure by 10.22%, depending on the affordability test or safe harbor you’re using. For example, under the Rate of Pay safe harbor, an employee earning $5,000 per month has a monthly affordability limit of $511.

What happens if an employer's health coverage isn't affordable?

An ALE may owe one of two employer shared responsibility payments under Section 4980H if its coverage is unaffordable or fails to meet minimum essential coverage (MEC) or minimum value standards and at least one full-time employee receives a premium tax credit for a Marketplace plan.

Can employers use safe harbors to determine ACA affordability?

Yes. ALEs can use the federal poverty level, rate of pay, or Form W-2 safe harbor to verify affordability for purposes of the employer mandate. These methods help employers determine ACA compliance without knowing employees' actual household income.

How does the 2027 affordability threshold affect a CHOICE Arrangement?

The 10.22% threshold helps determine whether a CHOICE Arrangement, formerly known as an ICHRA, is affordable coverage under the ACA so ALEs can avoid tax penalties. Employers will use their employees’ household income (or a safe harbor) and the lowest-cost silver plan on the local exchange to run the calculation. They must also subtract employees’ ICHRA contributions from the premium.

How do you calculate FTEs for ACA purposes?

For each month, count your full-time employees (those who average at least 30 work hours a week) and add the full-time equivalent represented by your non-full-time employees. To calculate non-full-time FTEs, add their monthly work hours, limit each employee to 120 hours, and divide the total by 120. Then average the monthly totals over 12 months and round the result down to the nearest whole number.

How many FTEs make an organization an ALE?

An employer is generally an ALE if it averaged at least 50 full-time employees, including FTEs, during the previous calendar year.

Do part-time employees count toward the 50-employee ACA threshold?

Yes. Although they don’t work on a full-time basis, you must combine the hours your part-time employees work with those of your full-time employees to determine whether the total reaches the 50-employee ALE threshold.

Do seasonal employees count when calculating ALE status?

Yes, you must include seasonal employees in the calculation, unless you qualify for the seasonal worker exception. To qualify, your workforce must exceed 50 full-time employees (including FTEs) for no more than 120 days during the calendar year, and the employees above the 50-employee threshold during that period are seasonal workers.

What happens if my company becomes an ALE?

If your organization becomes an ALE, it becomes subject to the ACA's employer shared responsibility provisions. This means the employer must offer affordable, minimum-value coverage to at least 95% of its full-time employees and their dependents, or it may owe one of the two employer shared responsibility payments, which can be very costly.

Can alternative funding strategies help control GLP-1 costs?

Traditional plans offer little control over these lifestyle drug costs. While reference-based pricing can limit what you pay, ICHRA is the only model that completely removes the employer from the equation. This is because ICHRA shifts those prescription costs onto the individual market, where community-rating applies.

Can I switch funding strategies midyear?

The easiest way to change strategies midyear is to switch to an ICHRA. Launching an ICHRA midyear creates a special enrollment period (SEP), allowing employees to enroll in qualifying individual health insurance plans. This flexibility means that large employers aren’t stuck with their traditional group plan until the end of the plan year.