ICHRA affordability in 2027: the 10.22% rule

Start with the plan year

IRS Revenue Procedure 2026-26 sets the 2027 percentage and its effective period. A calendar-year label matters: planning during 2026 for coverage that begins in 2027 is different from applying a rule to a plan year that began in 2026. Keep both versions in your records, rather than overwriting last year's assumptions.

A worked example, with visible assumptions

For Marketplace affordability, the reference is generally the employee's self-only lowest-cost Silver premium, reduced by the monthly ICHRA amount, compared with the applicable share of household income. Use the employee's actual circumstances and the governing rules. A selected plan's price is not necessarily the reference premium.

Illustration only: assume a $600 monthly reference premium, $50,000 annual household income, a $200 monthly allowance, and a plan year beginning in 2027. The reference cost after the allowance is $400 per month. The income-based comparison is $50,000 × 0.1022 ÷ 12, or approximately $425.83 per month. Under these simplified assumptions, $400 falls below that comparison amount.

Change the reference premium to $700 while holding the other inputs constant, and the residual becomes $500. That exceeds $425.83. The example explains why the same employer allowance can produce different employee results. These invented numbers are not a quote, benchmark, personalized eligibility determination, or claim about what employers typically contribute.

Separate affordability from the coverage decision

An ICHRA offer affects access to Marketplace premium tax credits. An affordable offer generally prevents those credits even if the employee declines it. When an offer is unaffordable, an employee generally must opt out of the ICHRA to seek a premium tax credit and must meet the other eligibility conditions. Follow the Marketplace's application process for the actual determination.

Affordability does not answer every plan-shopping question. Write down the doctors, prescriptions, service areas, and anticipated out-of-pocket costs you need to compare. Ask for clarification when the employer's reference calculation and your chosen policy show different prices. Keep the offer notice and the information used in your application.

Build a reviewable contribution decision

Employers evaluating employer-mandate obligations need a separate analysis of applicable rules and permitted safe harbors. Do not substitute payroll wages for household income in an employee's Marketplace calculation merely because wages are easier to obtain. A percentage alone does not resolve classes, notice, eligibility, plan availability, or administration.

1. Record the intended effective date and select the corresponding plan-year rule.
2. Have the adviser identify the correct reference premiums and the permitted basis for the employer's analysis.
3. Compare candidate allowances with employee-level results and the budget, including administrative fees.
4. Document unresolved cases and assign responsibility for explaining them before enrollment.
5. Retain the inputs, sources, and decision date so the analysis can be reproduced at renewal.

What this guide does not decide

This page explains the published percentage and illustrates its use. It does not calculate eligibility for a particular employee, recommend a contribution, establish employer compliance, or evaluate a household's tax position. The example deliberately holds several inputs constant; real premiums, incomes, coverage circumstances, and plan designs vary.

For the earlier period, use the 2026 affordability guide. For a broader employer review, continue with the implementation checklist and provider-selection framework. Bring the unresolved questions and source records to your benefits adviser.

Sources and evidence

Review dates are recorded for each source above. Company pages are useful for confirming how a product is described, but they do not prove service quality or customer results.