Rev. Proc. 2026-26 (July 21, 2026)
Available at https://www.irs.gov/pub/irs-drop/rp-26-26.pdf
The IRS has announced 2027 indexing adjustments for important percentages under the Affordable Care Act (ACA). The indexing adjustments are based on projections of premium growth and income growth. For 2025 and several years prior, the premium growth rate was based on per enrollee spending for employer-sponsored insurance as published in the National Health Expenditure Account. However, HHS revised the measure to also capture increases in individual market premiums, starting with the 2026 benefit year. The IRS is applying this updated premium growth measure for 2027 as well.
The required contribution percentage is used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility under Code § 4980H. It is adjusted from a 9.5% baseline to 10.22% for plan years beginning in 2027. (This is an increase from 9.96% for 2026.) The percentages used to determine the amount of household income that individuals who are eligible for premium tax credits must contribute toward the cost of Exchange coverage vary across household income bands. The 2027 percentages range from 2.15% to 10.22%.
EBIA Comment: Failure to offer affordable, minimum value coverage to full-time employees may result in employer shared responsibility penalties, so the adjustments to the affordability percentage will be of interest to applicable large employers and their advisors. Plan sponsors and their advisors should review employee contribution amounts for 2027 plan years to ensure that coverage remains affordable under the updated 10.22% required contribution percentage. For more information, see EBIA’s Health Care Reform manual at Sections XXI.G (“Premium Tax Credits”) and XXVIII.E (“Assessable Payment (Penalty Tax) When Inadequate Coverage Offered to Full-Time Employees and Dependents (the ‘Subsection (b) Penalty’)”).
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