The IRS just set the 2027 ACA employer mandate penalty amounts, and they are climbing again. Under Rev. Proc. 2026-22, the Section 4980H(a) “no coverage” penalty rises to $3,780 per full-time employee for plan years beginning after December 31, 2026. The Section 4980H(b) “unaffordable or inadequate coverage” penalty climbs to $5,670 per affected employee. That is roughly a 13% jump over 2026 figures, the second straight year of double-digit indexing, and well off the original $2,000 / $3,000 statutory baselines Congress wrote into the Affordable Care Act.
If your business is an Applicable Large Employer (ALE) that files Form 1095-C, the new 2027 numbers do not change what you owe for the current filing season, but they do raise the stakes on every coding decision your benefits team makes for the upcoming plan year. Here is what changed, why the jump is so big, and what to do about it before the IRS starts mailing Letter 226-J penalty notices.
The 2027 ACA Employer Mandate Penalty Amounts
The IRS adjusts the 4980H penalties each year based on the premium adjustment percentage published by the Department of Health and Human Services. For 2027, that percentage is 1.8916224814, meaning the original statutory dollar amounts are now multiplied by nearly two before being rounded down to the next $10 increment. The result:
per FTE / year ($315 / month)
per affected FTE / year ($472.50 / month)
The new amounts apply to taxable years and plan years that begin after December 31, 2026. They are set out in Revenue Procedure 2026-22.
The Penalties Have Climbed Sharply Since Indexing Started
The 4980H amounts started at $2,000 (the “A” penalty) and $3,000 (the “B” penalty) when the ACA’s employer mandate took effect. Annual indexing has now pushed both close to double their statutory baselines. The last two years in particular have seen unusually large jumps:
Why the back-to-back jumps? The premium adjustment percentage that drives indexing was rebased using the most recent National Health Expenditure Accounts (NHEA) Projections 2024-2033, which reflect higher projected per-enrollee private health insurance premiums than older NHEA data. HHS released the 2027 figures on January 29, 2026, and the IRS plugged them straight into the 4980H formula. So long as projected premium growth keeps outpacing 2013 baselines, the penalties will keep moving up.
A Quick Refresher: What Triggers Each Penalty
The 4980H(a) and 4980H(b) penalties exist for very different failures. Mixing them up is the single most common reason ALEs are caught off guard when an IRS Letter 226-J arrives.
The “A” penalty is the catastrophic one. If even one FTE picks up a Marketplace subsidy and your ALE missed the 95% offer threshold, you owe the penalty on essentially your entire workforce. The “B” penalty is narrower but stacks per affected employee, and a botched affordability calculation can turn into a six-figure bill in a hurry at $5,670 a head.
What ALEs Should Do Before the 2027 Plan Year
The new 2027 amounts do not change your current ACA reporting obligation for tax year 2026. Those 1095-Cs, due to recipients in early 2027 and to the IRS shortly after, still describe coverage offered during the 2026 plan year and will be assessed under the 2026 penalty rates if anything is wrong. But everything you do for the upcoming 2027 plan year will be measured against the new $3,780 / $5,670 figures.
- Recheck affordability for the 2027 plan year. The IRS publishes the 4980H affordability percentage in a separate revenue procedure each summer. Once it lands, recalculate employee contributions for your lowest-cost minimum-value plan against whichever safe harbor you use (W-2, rate of pay, or federal poverty line). A plan that was affordable in 2026 may not be in 2027.
- Audit your 1095-C codes now, not in January. Almost every Letter 226-J traces back to a coding error in Lines 14-16. Wrong offer codes, missing safe harbor codes, or mis-coded “non-employee” months are the usual culprits. Catching them before filing is an order of magnitude cheaper than responding to an IRS notice.
- Confirm the 95% offer threshold. The “A” penalty is binary: if your offer rate slips below 95% in any month, the entire workforce becomes exposed. Reconcile your monthly FTE counts against your enrollment and offer records, especially for variable-hour and seasonal employees.
- Document everything. If a Letter 226-J shows up, your response window is short and your defense will rest on the records you already have. Offer letters, waiver acknowledgements, ICHRA notices, and affordability calculations should all be retrievable in minutes, not weeks.
FAQ: 2027 ACA Employer Mandate Penalties
When do the 2027 penalty amounts take effect?
Rev. Proc. 2026-22 says the new figures apply to taxable years and plan years beginning after December 31, 2026. Calendar-year ALEs use the 2027 amounts for the 2027 plan year. Non-calendar-year plans use 2027 rates starting with the first plan year that begins on or after January 1, 2027.
Do the new amounts change my upcoming 1095-C filing?
No. The 1095-Cs you file in early 2027 cover the 2026 plan year and any penalties assessed against them use the 2026 rates ($3,340 and $5,010). The new $3,780 and $5,670 amounts are measured against your 2027 plan year activity and will not show up in IRS letters until 2028 at the earliest.
Are these penalties indexed every year going forward?
Yes. Section 4980H(c)(5) requires annual adjustment based on the HHS premium adjustment percentage. The IRS issues a new revenue procedure each year setting the figures, typically in the spring or summer for the following calendar year.
What is the 2027 ACA affordability percentage?
It has not been released yet. The IRS publishes the affordability percentage (used to test whether an offer of coverage is “affordable” under the safe harbors) in a separate revenue procedure, typically in late summer. Once it lands, you can finalize 2027 employee contribution amounts.
Bottom Line
The 2027 ACA employer mandate penalties are $3,780 for failing to offer coverage and $5,670 for offering coverage that is unaffordable or inadequate. Both are up roughly 13% from 2026 and now sit at almost double the original statutory amounts. With the IRS continuing to issue Letter 226-J notices and assessment amounts climbing each year, the cost of a coding error or a missed offer keeps going up.
BoomTax helps ALEs e-file Form 1094-C and Form 1095-C accurately and on time, with built-in code validation that catches the small mistakes that drive most 226-J letters. If you are gearing up for the 2026 ACA filing season, see our ACA forms hub and the current 2026 filing deadlines.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.
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