The Internal Revenue Service (IRS) has issued Revenue Procedure 2026-26, providing annual inflation-indexed adjustments used to determine eligibility for Affordable Care Act (ACA) premium tax credits and whether employer-sponsored health coverage is considered affordable for ACA purposes beginning in calendar year 2027.
These adjustments are particularly important for employers subject to the ACA’s employer shared responsibility provisions and for employees evaluating eligibility for Marketplace coverage and premium tax credits.
Affordability Percentage Increases for 2027
For plan years beginning in 2027, the IRS increased the ACA affordability threshold, known as the Required Contribution Percentage, to 10.22%.
This percentage is used to determine whether an employee’s required contribution for employer-sponsored minimum essential coverage is affordable for purposes of Internal Revenue Code Section 36B.
If an employer’s coverage is not considered affordable under the applicable standard, eligible employees may qualify for premium tax credits through an ACA Marketplace, which can have implications for employer shared responsibility liability.
Updated Premium Tax Credit Table Released
Revenue Procedure 2026-26 also updates the Applicable Percentage Table used to calculate premium tax credits for individuals purchasing Marketplace coverage during tax years beginning in 2027.
The revised table establishes the percentage of household income that individuals at various income levels may be expected to contribute toward health insurance premiums when determining premium tax credit eligibility and amounts.
IRS Adopts New Premium Growth Methodology
The IRS noted that the 2027 calculations incorporate a revised premium growth methodology.
Historically, the premium growth adjustment relied primarily on employer-sponsored health plan spending data. Beginning with the methodology adopted for 2026 and beyond, the calculation incorporates increases in individual market premiums in addition to employer-sponsored insurance premiums. According to the IRS, the change follows federal guidance issued by the Department of Health and Human Services in 2025.
The IRS also determined that an additional statutory adjustment was not required for 2027 because the applicable “failsafe” exception applied.
Employers Impacted
The guidance is primarily relevant to:
- Applicable large employers subject to ACA employer shared responsibility provisions;
- Employers evaluating the affordability of employee health coverage;
- Benefits professionals and plan administrators; and
- Organizations monitoring potential ACA penalty exposure.
Employer Takeaway
Employers should review the 10.22% affordability percentage when planning 2027 health plan contributions and conducting ACA affordability analyses. Organizations that use affordability safe harbors should ensure employee contribution structures remain compliant under the updated threshold to reduce the risk of employees qualifying for premium tax credits and triggering potential employer shared responsibility penalties. The changes apply to taxable years and plan years beginning in calendar year 2027.