The IRS has quietly reset one of the most consequential numbers in the Affordable Care Act, and most workers will never see it printed on a pay stub or a benefits enrollment packet. Starting with health plans that begin in 2027, an employer can require a worker to spend up to 10.22 percent of household income on job-based coverage, and federal law will still label that coverage “affordable.” The word matters because “affordable” is what decides whether a worker who finds the employer plan too expensive has any other place to turn.
IRS Sets the 2027 Affordability Bar at 10.22 Percent
The change comes from Revenue Procedure 2026-26, which the IRS issued to index two linked numbers under Internal Revenue Code Section 36B: the Applicable Percentage Table used to calculate premium tax credits, and the Required Contribution Percentage used to decide whether employer-sponsored coverage counts as affordable. Section 3.02 of the revenue procedure sets that Required Contribution Percentage at 10.22 percent for plan years beginning in calendar year 2027.
That is a jump from 9.96 percent for plan years beginning in 2026, the figure the IRS set a year earlier in Revenue Procedure 2025-25. Both documents index the same mechanism, so the two figures are directly comparable, and 10.22 percent is the first time this percentage has crossed 10 percent since the Affordable Care Act’s affordability test began being adjusted annually more than a decade ago.
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What the Required Contribution Percentage Actually Decides
The percentage is not a cap on what an employer can charge. It is a legal threshold in Section 36B(c)(2)(C)(i)(II) that determines whether a worker offered job-based coverage is also eligible to shop for a subsidized plan on the ACA marketplace instead. If the employee’s required contribution for self-only coverage stays at or under the indexed percentage of income, the employer plan is deemed affordable, and that worker generally cannot claim a premium tax credit for marketplace coverage, no matter how large a share of the household budget the premium actually consumes.
Raising the percentage to 10.22 percent for 2027 widens that zone. A plan that would have failed the affordability test at 9.96 percent of income in 2026 can pass it at the same dollar cost in 2027, simply because the indexed ceiling moved and the worker’s income did not move with it by the same margin.
The Same Number Also Shields Employers From Penalties
The Required Contribution Percentage does double duty. According to the IRS’s own employer shared responsibility guidance, the same indexed threshold “applies for purposes of both the premium tax credit provisions and the employer shared responsibility affordability safe harbors,” and it is adjusted every year in step with the premium tax credit number. Applicable large employers use one of three IRS-approved safe harbors, tied to Form W-2 wages, an employee’s rate of pay, or the federal poverty line, to test whether the coverage they offer clears this bar.
When the percentage rises, employers get more room before their lowest-cost self-only plan is considered unaffordable and exposes the company to a Section 4980H shared-responsibility payment. A higher number is friendlier to employer budgets. It is not friendlier to a worker’s.
What 10.22 Percent Looks Like in a Paycheck
Put dollar figures on it and the gap is easier to see. A worker earning $45,000 a year could be required to contribute up to $4,599 annually, or about $383 a month, toward self-only coverage in 2027 and the plan would still be classified as affordable. At 2026’s 9.96 percent, the same income allowed a required contribution of up to $4,482, or roughly $373.50 a month. The indexed increase alone lets an employer ask that worker for about $117 more over the year for coverage the government still calls affordable, with no change in the worker’s paycheck required to justify it.
For a household already budgeting tightly around rent, groceries, and debt payments, that gap lands the same way any other fixed cost increase does. The difference is that this one is set by a federal indexing formula the worker never votes on and rarely hears about until open enrollment.
Why the Threshold Keeps Climbing
Revenue Procedure 2026-26 explains the mechanics behind the number. The Required Contribution Percentage is indexed each year to projected premium growth and income growth, using methodology the Treasury Department and IRS carried over from Revenue Procedure 2014-37. Starting with the 2026 benefit year, the calculation also began using a new premium growth measure adopted under the 2026 HHS Marketplace Integrity and Affordability rule, one that folds in individual-market premium increases alongside employer-sponsored insurance costs rather than employer plans alone.
That methodology shift is part of why the percentage jumped from 9.96 percent to 10.22 percent in a single year rather than inching up by a few hundredths of a point, as it typically has in years past. The revenue procedure is effective for taxable years and plan years beginning in calendar year 2027, which means the higher threshold applies the next time most employers run open enrollment for the coming plan year, not immediately to coverage already in place.
The revenue procedure also notes that the Treasury Department and IRS decided an additional adjustment built into Section 36B(b)(3)(A)(ii)(II), sometimes described as a failsafe provision, does not apply for plan years beginning in 2027 because a separate failsafe exception in the statute already covers that year. In plain terms, the agencies determined no extra correction was needed on top of the premium- and income-growth indexing already baked into the 10.22 percent figure, so the number in Section 3.02 is the final word for 2027 rather than a placeholder subject to a later revision.
What Workers Can Still Check Before Open Enrollment
None of this indexing shows up automatically on a benefits portal, so the only way a worker learns whether an employer’s plan clears the 10.22 percent bar is to do the math directly: divide the annual employee-only premium contribution by expected household income, then compare that figure to the threshold. Workers whose employer contribution sits close to the line have the most to gain from checking, since a plan that barely passes in 2026 dollars could pass more comfortably, or newly fail, once 2027 premiums and the updated percentage are both applied.
Because the test is calculated off self-only coverage cost, a family plan that is genuinely unaffordable for a spouse or dependents can still leave them locked out of marketplace subsidies if the employee’s own self-only contribution passes the 10.22 percent test. That distinction, built directly into how Section 36B is written, is worth knowing before assuming a marketplace plan is off the table for anyone else on the policy.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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