ACA Employer Penalties and Compliance: What Employers Need to Know Heading Into 2027
Quick Overview
The IRS has published every figure that governs ACA employer mandate compliance for 2027. The affordability percentage for plan years beginning in 2027 is 10.22 percent, up from 9.96 percent in 2026, and it marks the first time the threshold has exceeded 10 percent. The 4980H(a) penalty rises to $3,780 per full-time employee and the 4980H(b) penalty to $5,670.
This guide lays out the 2026 and 2027 numbers side by side, the safe harbor amounts employers can build 2027 contributions around, where premium tax credits stand heading into marketplace open enrollment, and the dates for Forms 1094-C and 1095-C in early 2027.
What Changed for 2027?
Two IRS revenue procedures set the 2027 figures. Rev. Proc. 2026-22, released May 4, 2026, indexed the employer shared responsibility penalty amounts. Rev. Proc. 2026-26, released July 21, 2026, set the affordability percentage.
| Figure | 2026 | 2027 |
|---|---|---|
| 4980H(a) penalty (annual, per full-time employee) | $3,340 | $3,780 |
| 4980H(a) penalty (monthly) | $278.33 | $315.00 |
| 4980H(b) penalty (annual, per affected employee) | $5,010 | $5,670 |
| 4980H(b) penalty (monthly) | $417.50 | $472.50 |
| Affordability percentage | 9.96% | 10.22% |
| FPL safe harbor (monthly, 48 contiguous states) | $129.89 | $135.92 |
These figures run on two calendars. Penalty amounts follow the calendar year, so the 2026 amounts apply to every month of 2026 and the 2027 amounts begin January 1, 2027. The affordability percentage follows the plan year, so a plan year that begins in 2026 keeps the 9.96 percent figure through its final month, and the 10.22 percent figure takes effect at the first renewal in 2027.
Which Employers Must Comply With the ACA Employer Mandate?
Applicable Large Employers are organizations that averaged 50 or more full-time employees, including full-time equivalents, during the prior calendar year.
A full-time employee is generally one who averages at least 30 hours of service per week or 130 hours per month. Full-time equivalents are calculated separately from the aggregate hours worked by part-time staff. For definitions of the terms that drive this calculation, see our ALE term guide.
ALE status is determined annually and applies to the entire following year, which means 2026 headcount sets 2027 obligations. Employers that cross the threshold unintentionally often discover their exposure after penalties are assessed. Franchise groups and multi-entity businesses carry an added layer here: IRS controlled group rules can combine related entities into a single ALE calculation even when each location operates independently day to day. Our guide to structuring health benefits for franchise portfolios covers how aggregation shapes plan design.
What Does ACA-Compliant Coverage Require?
Under the Employer Shared Responsibility provisions, ALEs must offer health coverage to at least 95 percent of full-time employees and their dependents. That coverage must meet three standards, and each one is evaluated on its own.
Minimum Essential Coverage. MEC establishes the offer of coverage and addresses 4980H(a) exposure. SBMA’s MEC plans are built to meet this standard with preventive care, wellness visits, and telehealth employees use.
Minimum Value. A plan meets Minimum Value when it covers at least 60 percent of total allowed costs and includes substantial coverage of inpatient hospital and physician services. Restricted Medical (MV) coverage is designed to meet this standard when paired with MEC.
Affordability. Affordability measures the employee’s required contribution for the lowest-cost, self-only plan that meets Minimum Value against the threshold in effect for that plan year.
Many ALEs combine MEC with a Minimum Value plan to address both penalties in one benefits structure. For a closer look at how these plan types work together, see Acute Care (MEC) vs. Restricted Medical (MV) and MEC vs. Limited Medical vs. MVP.
How Much Are ACA Employer Penalties in 2026 and 2027?
Both penalties are triggered when at least one full-time employee enrolls in marketplace coverage and receives a Premium Tax Credit.
4980H(a): Failure to Offer Coverage
The 4980H(a) penalty applies when an ALE fails to offer Minimum Essential Coverage to at least 95 percent of full-time employees and their dependents. It is calculated across the full-time workforce, minus the first 30 employees.
The amount is $3,340 per full-time employee for 2026 ($278.33 per month) and $3,780 for 2027 ($315.00 per month). For an ALE with 130 full-time employees that misses the offer threshold for all of 2027, that comes to 100 employees multiplied by $3,780, or $378,000.
4980H(b): Coverage That Is Unaffordable or Lacks Minimum Value
The 4980H(b) penalty applies when coverage is offered but is unaffordable or falls below Minimum Value, and a full-time employee receives a Premium Tax Credit. It is assessed per affected employee.
The amount is $5,010 for 2026 ($417.50 per month) and $5,670 for 2027 ($472.50 per month). The total 4980H(b) assessment is capped at the amount the employer would have owed under 4980H(a) for the same period.
How Penalties Are Assessed
Both figures are indexed annually and assessed retroactively from reported data, typically through IRS Letter 226-J, which often arrives a year or more after the relevant tax year closes. Employers have at least 90 days to respond to a proposed assessment, using Form 14764.
What Is the 2027 ACA Affordability Threshold?
For plan years beginning in 2027, coverage is affordable when the employee’s required contribution for the lowest-cost, self-only plan that meets Minimum Value does not exceed 10.22 percent of household income. The increase from 9.96 percent gives employers additional room in setting 2027 employee contributions.
Because employers rarely know household income, most use one of three IRS safe harbors.
Federal Poverty Line safe harbor. For calendar-year 2027 plans, employers apply 10.22 percent to the 2026 federal poverty line of $15,960 for the 48 contiguous states, which produces a monthly employee contribution of about $135.92. Plan years that began in 2026 continue to use $129.89. This safe harbor applies uniformly across the workforce with no individual calculations.
Rate of pay safe harbor. Employers multiply an hourly employee’s rate of pay by 130 hours, then by 10.22 percent. An employee earning $20 per hour can be charged up to $265.72 per month for self-only coverage in a 2027 plan year.
W-2 safe harbor. Employers apply 10.22 percent to an employee’s Box 1 W-2 wages for the year. This method is confirmed after year-end, so employers using it often build in a margin when setting contributions.
SBMA’s MEC Calculator can help estimate cost and penalty exposure across these scenarios.
How Do Non-Calendar Plan Years Apply the Threshold?
The affordability percentage attaches to the plan year start date. A plan year beginning July 1, 2026 uses 9.96 percent through June 30, 2027, and the July 1, 2027 renewal moves to 10.22 percent. Employers with off-cycle plan years should confirm that payroll and reporting systems carry the correct percentage for each plan year as it renews.
How Do Premium Tax Credits Affect Employer Exposure in 2027?
Premium Tax Credits are the trigger for both 4980H penalties, so marketplace subsidy policy shapes employer exposure directly.
The enhanced Premium Tax Credits expired at the end of 2025. The House passed a three-year extension on January 8, 2026, and no extension has been enacted since. Marketplace open enrollment for 2027 coverage begins November 1, 2026 under the standard subsidy rules. Marketplace enrollment for 2026 fell to 22.8 million, down 3.4 percent from the prior year.
As individual marketplace coverage costs more, employees tend to look more closely at their employer’s offer, and that places more weight on whether employer coverage meets affordability and eligibility standards. Planning 2027 contributions around the current subsidy structure gives employers a stable baseline, and any change from Congress can be layered onto that plan as it develops.
When Are ACA Reporting Forms Due in 2027?
Forms 1094-C and 1095-C filed in early 2027 report 2026 coverage, so they are measured against the 2026 figures: the 9.96 percent affordability percentage and the 2026 penalty amounts. Based on the IRS filing rules and the 2027 calendar, the dates are:
- March 1, 2027: Paper filing deadline with the IRS (February 28 falls on a Sunday). Paper filing is limited to employers with fewer than 10 information returns in total.
- March 2, 2027: Deadline to furnish Form 1095-C to employees. This 30-day extension from January 31 is now permanent and applies automatically.
- March 31, 2027: Electronic filing deadline with the IRS.
Employers filing 10 or more information returns, counted across all return types combined, must file electronically. That aggregate count includes W-2s and 1099s, so nearly every ALE files electronically.
Employers may also use the alternative furnishing method, which allows a clear, conspicuous notice on the company website explaining how employees can request a copy of Form 1095-C. Under this method, the notice must be posted by the furnishing deadline and remain available through October 15, and requested forms must be provided within 30 days. The underlying data carries the same accuracy standard under either method.
Several states run their own coverage reporting requirements with separate deadlines, including California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia. California also requires employers to furnish forms directly to employees.
Where Do ACA Penalties Usually Originate?
Penalty exposure most often traces back to day-to-day administration. The most common sources are:
- Eligibility tracking errors
- Late or missed offers of coverage after a measurement period
- Affordability safe harbor calculations that carry forward a prior year’s percentage
- Inconsistent payroll and HRIS data
- Incorrect or incomplete coding on Forms 1094-C and 1095-C
Employers that offered coverage in good faith can still receive a Letter 226-J when reported data differs from what employees experienced. Clean offboarding plays a large part here. Coverage terminations and eligibility changes that go untracked create the same reporting gaps that lead to IRS notices, and our ACA offboarding checklist walks through each checkpoint.
What Should Employers and Brokers Do Before the 2027 Plan Year?
Set 2027 contributions at 10.22 percent. Recalculate employee contributions for plan years beginning in 2027 using the safe harbor that fits the workforce, and confirm the result before open enrollment materials are finalized.
Keep 2026 calculations at 9.96 percent. The remaining months of 2026, along with Forms 1095-C filed in early 2027, are measured against 2026 figures.
Update payroll and reporting systems. Confirm that 2027 safe harbor figures load for plan years starting in 2027 and that 2026 figures stay attached to 2026 reporting.
Audit eligibility tracking and offer timing. Review measurement periods, stability periods, and the timing of offers for newly eligible employees.
Calendar the 2027 reporting dates. Build data review into January so Forms 1095-C are ready for the March 2 furnishing deadline and the March 31 electronic filing deadline.
Bring 2027 figures into renewal conversations. Brokers can use the updated thresholds and penalty amounts to model contribution strategies with clients. SBMA’s broker resources support those conversations.
Frequently Asked Questions
What is the ACA affordability percentage for 2027?
The affordability percentage for plan years beginning in 2027 is 10.22 percent, up from 9.96 percent for 2026. It is the first time the threshold has exceeded 10 percent.
How much are the ACA employer penalties for 2027?
For 2027, the 4980H(a) penalty is $3,780 per full-time employee (minus the first 30), and the 4980H(b) penalty is $5,670 per full-time employee who receives a Premium Tax Credit. For 2026, the amounts are $3,340 and $5,010.
What is the 2027 Federal Poverty Line safe harbor amount?
For calendar-year 2027 plans, the FPL safe harbor allows a monthly employee contribution of about $135.92 for self-only coverage in the 48 contiguous states, based on the 2026 federal poverty line of $15,960.
Which affordability percentage applies to a plan year that started in mid-2026?
A plan year that began in 2026 uses 9.96 percent for its full duration. The 10.22 percent figure applies when that plan renews in 2027.
When are Forms 1095-C due in 2027?
Forms 1095-C reporting 2026 coverage are due to employees by March 2, 2027. Electronic filing with the IRS is due March 31, 2027, and paper filing, available to employers with fewer than 10 total information returns, is due March 1, 2027.
How long do employers have to respond to Letter 226-J?
Employers have at least 90 days to respond to a proposed employer shared responsibility assessment, using Form 14764.
Were the enhanced Premium Tax Credits extended for 2027?
As of early October 2026, no extension has been enacted. The enhanced credits expired at the end of 2025, and marketplace open enrollment for 2027 begins November 1, 2026 under the standard subsidy rules.
Does a MEC plan address both ACA penalties?
A MEC plan offered to at least 95 percent of full-time employees addresses 4980H(a). Pairing MEC with a plan that meets Minimum Value and affordability standards addresses 4980H(b) as well. Learn more about how MEC and Minimum Value plans work together.
Building the 2027 Plan Year on Published Numbers
With every 2027 figure now published, employers and brokers can set contributions, confirm eligibility processes, and prepare reporting systems around a complete set of numbers. For a broader look at how ALE status, coverage requirements, and reporting fit together, see the Ultimate Guide to Applicable Large Employer Benefits, and connect with SBMA to build a 2027 strategy around MEC and Minimum Value coverage.
