The IRS recently released Rev. Proc. 2026-26, which raised the 2027 affordability safe harbor percentage for employer-provided medical coverage to 10.22% (an increase from 2026’s 9.96%). This affordability percentage affects both: (1) individuals’ eligibility for subsidies in the public health insurance marketplace (the “Marketplace”), and (2) the employer affordability safe harbors used to avoid potential employer mandate penalties.
This Alert is relevant for any applicable large employer (ALE), as defined under the Affordable Care Act (ACA), and provides a summary of: (i) the ACA’s employer mandate penalties, (ii) the three available employer affordability safe harbors, and (iii) a description of how the 10.22% affordability safe harbor percentage will affect setting employee contributions for the 2027 plan year.
