Selerix Compliance Corner Update! 

What the updated 10.22% threshold means for employers—and why year-round ACA compliance still matters. 

The headline: For plan years beginning in 2027, the ACA affordability percentage rises to 10.22%—the first time the threshold has exceeded 10%. 

Every year, the IRS releases updated Affordable Care Act (ACA) affordability percentages. The announcement may look like another technical adjustment, but for HR and benefits teams, it can directly affect how employee contributions are structured and how organizations plan for the next plan year. 

For plan years beginning in 2027, the ACA affordability percentage increases to 10.22%. That is up from 9.96% in 2026 and marks the first time the threshold has crossed into double digits. The higher percentage gives Applicable Large Employers (ALEs) additional flexibility when determining the maximum employee contribution that may still be considered affordable under the ACA. 

Not sure whether your organization is considered an ALE? Use the Selerix Applicable Large Employer Calculator to estimate your status based on prior-year workforce data. 

What Changed for 2027? 

The IRS released Revenue Procedure 2026-26, which contains the inflation-adjusted amounts used to determine whether employer-sponsored coverage is affordable for purposes of the ACA employer shared responsibility provisions and premium tax credit program. The IRS also released Revenue Procedure 2026-22, which contains the indexed amounts used to calculate Employer Shared Responsibility Payments (ESRPs) for 2027. 

The increase gives employers a little more room when setting employee premium contributions while still meeting ACA affordability requirements. Think of it as a wider lane: there is more room to maneuver, but the rules of the road still apply. 

Why This Matters for Applicable Large Employers 

Under the ACA, an Applicable Large Employer generally is an employer that averaged 50 or more full-time equivalent employees during the prior calendar year. ALEs must offer health coverage to full-time employees or may be subject to an ESRP if coverage is not offered—or if the coverage offered is not affordable or does not provide minimum value. 

For 2027, coverage is considered affordable if the employee’s required contribution for self-only coverage under the employer’s lowest-cost minimum value plan does not exceed 10.22% of the employee’s household income. 

Because employers typically do not know an employee’s household income, the IRS allows ALEs to use one or more affordability safe harbors: 

• Form W-2 Safe Harbor 
• Rate of Pay Safe Harbor 
• Federal Poverty Line (FPL) Safe Harbor 

If an employer’s coverage is not affordable under an applicable safe harbor and a full-time employee is approved for a premium tax credit for Marketplace coverage, the employer may be subject to an ESRP. 

For a broader refresher on how the employer mandate, eligibility rules, affordability, and reporting requirements work together, watch ACA Fundamentals Every Employer Should Revisit. 

More Flexibility Does Not Mean Less Compliance 

A higher affordability percentage is helpful, but it does not reduce the employer’s underlying ACA responsibilities. The threshold is only one input in a much larger compliance process. 

Employers still need dependable processes for determining full-time status, tracking employee hours, applying measurement and stability periods where appropriate, calculating affordability, managing coverage offers, preparing Forms 1094-C and 1095-C, and filing required information with the IRS. 

In other words, the number changed. The mandate did not. 

That is why ACA compliance works best as a year-round operational process—not a filing-season fire drill. The Selerix ACA Compliance Software supports the full compliance lifecycle, including connected data, eligibility tracking, Form 1095-C coding, electronic filing and distribution, risk monitoring, and compliance support. 

The ACA Employer Mandate Is Still in Effect 

The federal individual mandate penalty for individuals who do not have qualifying health coverage was reduced to $0 beginning in 2019 under the Tax Cuts and Jobs Act. A subsequent lawsuit challenging the constitutionality of the ACA based on that change was unsuccessful. 

The employer mandate, however, has not been repealed. The IRS continues to enforce it through Letter 226J and is currently enforcing Employer Shared Responsibility Payments for tax year 2024. The IRS also continues to enforce the ACA reporting requirements themselves. 

If the IRS has not received an ALE’s Forms 1094-C and 1095-C, it may send Letter 5699. These notices are another reminder that filing a form is not the same as confirming that the filing was complete, accurate, and accepted. 

For a plain-language look at one of the most serious ACA notices, read The IRS Letter You Don’t Want to Open: What Triggers 226J and How to Avoid It. You can also use the ACA Penalty Letter Playbook to understand common notices and the importance of responding quickly. 

Received a penalty letter? We can help.  

A Quick Note on the 2027 Federal Poverty Line Safe Harbor 

Employers using the Federal Poverty Line (FPL) Safe Harbor may set a required employee contribution that does not exceed 10.22% of the mainland single federal poverty level in effect within six months before the start of the plan year, divided by 12. 

For calendar-year 2027 plans, the calculation uses the 2026 FPL amount of $15,960: 

While the IRS permits standard rounding in many cases—which would produce $135.93—a cautious approach is to set the FPL Safe Harbor contribution at $135.92 for calendar-year 2027 plans. 

What Employers Should Do Next 

The updated threshold gives employers additional flexibility for 2027, but it should also prompt a broader review of contribution strategy, reporting readiness, and prior-year filing status. 

1. Familiarize your benefits, HR, payroll, and finance teams with the updated 10.22% affordability percentage for plan years beginning in 2027. 

2. Factor the increased percentage into employee contribution decisions for plan years beginning in 2027. Employers with non-calendar-year plans should use the affordability percentage in effect at the start of the plan year. 

3. Prepare to electronically file Forms 1094-C and 1095-C with the IRS in 2027. Selerix can help! 

4. Confirm that prior-year forms were filed and accepted by the IRS. Employers that e-file receive a Receipt ID showing whether the submission was “accepted” or “accepted with errors.” 

For a closer look at the reporting process, review the ACA Year-End Reporting Guide for Employers, which explains how ongoing workforce and coverage data flows into Forms 1094-C and 1095-C. 

ACA Compliance Is Bigger Than One Percentage 

The 10.22% affordability threshold is meaningful. It creates more flexibility for employers and should be considered as organizations set contribution rates for 2027. But it does not simplify the many other moving parts involved in ACA compliance. 

Eligibility tracking, hours-of-service measurement, affordability determinations, offer documentation,Form 1095-C coding, electronic filing, employee distribution, prior-year corrections, and IRS notices all require consistent attention. The most effective approach connects those responsibilities instead of managing them as separate, once-a-year projects. 

Selerix helps employers manage ACA compliance from eligibility through filing and defense. Explore Selerix ACA Compliance Software to see how technology and experienced compliance support can help reduce administrative burden, improve visibility, and make year-round ACA administration easier to manage. 

Partner with an ACA expert to ensure these updates do not go missed when reporting season comes. Talk to one of our ACA experts to get started.

Disclaimer: Selerix does not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this post is intended to provide a general overview of the topics and services contained herein. Selerix makes no representation or warranty as to the accuracy or completeness of the post and undertakes no obligation to update or revise the post based upon new information or future changes.