In Revenue Procedure 2026-22, the IRS issued the indexing adjustments for calculating employer shared responsibility payments (ESRPs) under the Affordable Care Act (ACA) for 2026.

Background

Employers are responsible for ESRPs for any given month when: (1) an applicable large employer (ALE) fails to offer minimum essential coverage (MEC) to at least 95% of full-time employees (the A Penalty), or (2) an ALE offers full-time employees and their dependents MEC providing minimum value that is unaffordable (the B Penalty). In both cases, an ESRP is only triggered when a full-time employee enrolls in coverage through a federal or state-provided health insurance marketplace and qualifies for premium support in the form of a premium tax credit (PTC) under IRC Section 36B.

The ESRP amounts were set by the ACA in 2014 to be indexed each year by a formula incorporating the premium adjustment percentage.

For 2027, an employer that does not offer MEC coverage to at least 95% of their full-time employees may be assessed the "A Penalty" of $3,780 for each full-time employee (up from $3,340 for 2026). An employer that does not offer a minimum value plan that is affordable may be assessed the B penalty of $5,670 for each full-time employee who receives a PTC (up from $5,010 for 2026). An employer cannot be subject to both penalties.

Implications

This is the second year that there has been a substantial increase in penalties (see Tax Alert 2025-1568). Employers, particularly for large workforces or employers with historically marginal affordability results, should consider reviewing their compliance, including re-evaluating affordability modeling, full-time employee identification and ACA reporting controls.