ACA affordability in 2027: What Texas employers with 50+ employees need to check before renewal

For plan years starting in 2027, the ACA affordability percentage rises to 10.22%. If your plan renews January 1, the contributions you set now get tested against it.

This is for Texas employers with 50 or more employees. You'll see whether the rules apply to you, how to check your contributions and what a miss costs.

These are federal IRS rules, and the 2027 numbers come from the IRS.

What is the ACA affordability percentage for 2027?

The IRS's Rev. Proc. 2026-26 sets it at 10.22% for plan years beginning in calendar year 2027. The IRS uses it to decide whether an employee's employer coverage counts as affordable.

Your plan year decides which figure applies, not the calendar.

A plan year that started July 1, 2026 keeps the 2026 figure of 9.96% until it renews.

The employer safe harbors use 10.22% too. The law's "9.5 percent" is adjusted each year, as the IRS's Q&A on employer shared responsibility explains.

Does this apply to your company? Texas group size vs federal applicable large employer (ALE) status

The employer affordability rules apply to applicable large employers (ALEs). Under the federal definition of an applicable large employer, that's an employer that averaged at least 50 full-time employees, including full-time equivalent employees (FTEs), in the preceding calendar year.

So your 2026 numbers decide your 2027 status.

The IRS counting rules work like this:

• A full-time employee averages at least 30 hours of service a week. In a month, 130 hours counts as full-time.
• FTEs for a month: add the hours of employees who aren't full-time (up to 120 per person) and divide by 120.
• Add full-time employees and FTEs for each month of the year, divide by 12 and round down.

A seasonal worker exception can apply if you went over 50 for 120 days or less and the extra workers were seasonal. Related companies are counted together when deciding ALE status. For the details, see how the measurement and look-back periods work.

Texas counts differently.

Texas insurance law defines a small employer as a business with 2 to 50 employees, regardless of how many hours they work. In the Texas Department of Insurance's guide for employers, large employer plans are for employers with more than 50 employees.

One test counts heads. The other counts full-time employees plus FTEs. So you can buy large group coverage in Texas without being an ALE, or the reverse.

The employer affordability test: self-only coverage with minimum value

The test uses the lowest-cost self-only option that provides minimum value and is available to the employee. Family coverage isn't the benchmark. A plan provides minimum value if it covers at least 60% of the total allowed cost of benefits and gives substantial coverage of inpatient hospital and physician services.

Health reimbursement arrangements (HRAs) and flex credits can change what the employee pays.

The IRS tests affordability against household income, which employers generally don't know. That's why there are three safe harbors you can use instead.

The three 4980H safe harbors, with 2027 math

You can use them only if you offer at least 95% of your full-time employees and their dependents the chance to enroll in coverage that provides minimum value for self-only coverage.

They address only the B penalty. The A penalty is a separate 95% offer test.

You can apply a safe harbor by reasonable employee category, such as hourly or salaried, as long as you apply it the same way to everyone in that category. All three are set out in the safe harbor regulation:

• With the W-2 wages safe harbor, for an employee offered coverage for the full calendar year, their share for the year for the lowest-cost self-only minimum value plan is no more than 10.22% of their Box 1 W-2 wages from you. For a partial-year offer, such as after a waiting period, the W-2 wages are prorated by the months coverage was offered compared with the months employed. It's checked after the year ends, employee by employee, and the contribution has to stay a consistent amount or percentage all year.
• With the rate of pay safe harbor, an hourly employee's monthly share is no more than 10.22% of 130 times their hourly rate. The rate to use is the lower of their rate on the first day of the coverage period (generally the first day of the plan year) and their lowest rate during that month. For a salaried employee, the limit is 10.22% of monthly salary as of the first day of the coverage period, and the safe harbor isn't available if that salary is reduced. Hypothetical example: if the rate to use is $15.00 an hour, 130 hours is $1,950, so the most the employee could pay for self-only coverage is $199.29 a month.
• With the federal poverty line safe harbor, the monthly share is no more than 10.22% of the single-person federal poverty line, divided by 12. You may use any poverty guideline in effect within six months before your plan year starts. The 2026 HHS poverty guidelines set it at $15,960 for one person. For a January 1, 2027 plan year, that gives $135.92 a month. That's our arithmetic, rounded down, not a figure the IRS publishes.

Which safe harbor fits depends on your workforce and payroll.

The 2027 A and B penalty amounts

Rev. Proc. 2026-22 sets the 2027 amounts at $3,780 per full-time employee for the A penalty and $5,670 per affected full-time employee for the B penalty. The IRS figures the payment monthly at 1/12 of the annual amount: $315.00 and $472.50 a month by our calculation.

• A penalty: applies if you don't offer minimum essential coverage to at least 95% of full-time employees and their dependents, and at least one full-time employee gets a premium tax credit. If you have fewer than 100 full-time employees, offering coverage to all but five of them, and to their dependents, meets this test. It's counted on all your full-time employees, minus up to 30.
• B penalty: can apply if you meet the A penalty's offer test but a full-time employee gets a premium tax credit because you didn't offer that employee coverage, or the coverage you offered wasn't affordable or didn't provide minimum value, unless a safe harbor or other relief applies. It's counted per affected full-time employee and capped at the A amount.

For any one month, you can owe one or the other, never both. In a group of related companies, each company is assessed on its own.

If the IRS decides you may owe a payment, it plans to tell you with Letter 226J.

For a wider look at the rules, see how Houston businesses can reduce ACA penalty risks.

Your pre-renewal checklist for 2027

1. Confirm ALE status from your 2026 monthly counts, including FTEs and related companies.
2. Note your plan year start date. 10.22% applies from the first plan year that begins in 2027.
3. Find your lowest-cost self-only option that provides minimum value.
4. Check how HRAs and flex credits change the employee's cost.
5. Choose a safe harbor for each reasonable employee category and apply it consistently.
6. Run the 2027 math for that safe harbor.
7. Confirm you offer minimum value coverage to at least 95% of full-time employees and their dependents.

For help with the compliance side, including year-end reporting, talk to us about your reporting through our ACA compliance and reporting support.

Check your 2027 contributions before you sign

If your plan renews soon, you can upload your renewal summary through our Renewal Review. Questions about your 2027 contributions? Call our team.

This post is general information, not tax or legal advice.