By Christy Abend
For many HR professionals, "ACA Season" is synonymous with the frantic first quarter—a time of gathering data, manually triple-checking forms, and rushing to meet IRS State filing deadlines. However, viewing ACA compliance solely as an end-of-year reporting task can be a high-risk strategy.
As revealed in our ACA Palooza 2025 presentation, true compliance requires a shift from reactive reporting to proactive, year-round monitoring. Mistakes made in June can potentially lead to costly penalties in January, and with the increase in penalties, the stakes have never been higher.
Waiting until the end of the year to address ACA data can create significant gaps, potentially leading to IRS Letter 226J notifications. Common pitfalls include:
Missed Coverage Offers: Failing to track Full-Time Equivalent (FTE) status for variable-hour employees in real-time can often lead to missed offers of coverage, which is typically a primary trigger for ACA penalties.
Affordability Oversights: Don't wait until the end of the year to check if your insurance is affordable. Under the ACA, if your lowest-cost plan costs an employee more than the IRS-approved limit (e.g., 9.02% of their income for 2025), you risk "Penalty B." Because the IRS calculates these penalties monthly, a mistake made during Open Enrollment can't be fixed later. If even one full-time employee finds your plan too expensive and gets a government subsidy, you could owe a fine for every month they were underpaid or overcharged.
Rehire Mismanagement: If the rehire has been gone for less than 13 weeks, the IRS usually considers them a "continuing employee." This means you should offer them coverage immediately—you should not make them wait another 90 days. If you incorrectly force a returning worker into a new waiting period, you are technically in violation for those months. While the IRS might not notice right away, a penalty is triggered if that employee goes to the Health Marketplace and gets a subsidy. This can lead to an IRS inquiry (Letter 226J) and possibly expensive, retroactive fines for every month their coverage was delayed.
Individual Coverage Health Reimbursement Arrangement (ICHRA) Complexity: For employers using or considering an ICHRA, determining the correct affordability and enrollment codes can be significantly more complex than traditional group plans, as it requires calculating the "lowest cost silver plan" for each employee’s specific location and age.
Data Silos: Inaccuracies often stem from a lack of coordination between HR (classifications), Payroll (hours and wages), and Benefits Systems (enrollment and waivers).
To help ensure greater continuity and better ACA regulatory compliance, HR teams should adopt a lifecycle approach to ACA administration.
Don’t wait until year-end to discover potential ACA gaps. Leading employers build regulatory compliance into their operational rhythm with regular reviews that help identify potential risk and reduce or prevent costly Employer Shared Responsibility Payment (ESRP) penalties:
Pre-Plan Year: Set your affordability strategy. Before the plan year begins, determine which IRS affordability safe harbor you will use (W-2, Rate of Pay, or Federal Poverty Level). Then establish employee contribution levels to help ensure at least one plan option meets ACA affordability requirements for the entire year.
Monthly: Monitor workforce and eligibility changes. ACA compliance shifts as your workforce changes. Monthly reviews help ensure your data stays more accurate.
Track employee hours to help identify full-time status changes
Update employment status for new hires, terminations, and leaves
Confirm timely offers of coverage for newly eligible employees
Monitor contribution levels and eligibility data that feed into ACA reporting
Quarterly: Validate compliance and reporting readiness. Quarterly reviews help catch issues earlier before reporting season.
Review eligibility tracking and measurement period data for accuracy
Re-validate affordability across employee populations
Review ACA data fields used for Forms 1094-C and 1095-C
Identify potential ESRP exposure before IRS notices arrive
Organizations that treat ACA compliance as a continuous operational process rather than a once-a-year reporting task are often far better positioned to reduce or avoid penalties and have less last-minute reporting stress.
ACA accuracy depends on data alignment across multiple platforms. Ensure that your HR classifications (leaves, rehires), payroll data (wages for affordability), and benefits elections (coverage dates) are all speaking the same language.
Monitor status changes and mid-year hires as they happen. Understanding the immediate impact of these changes on measurement periods allows you to make more timely offers of coverage and help avoid "lagging" inaccuracies.
Manual tracking is prone to human error. Use technology that provides:
Automated Alerts: Systems that flag missed offers or status changes immediately.
Audit Trails: Tools that track approvals and submissions, creating clearer information for the IRS.
Affordability Calculations: Automated tools that help calculate the optimal safe harbor for each employee population.
The Employer Reporting Improvement Act (ERIA) has established a six-year statute of limitations for assessing employer shared responsibility penalties for forms due after December 31, 2024. This means the IRS can look back much further than before, making tidy record-keeping and year-round vigilance more essential.
By moving beyond the "reporting season" mindset, HR professionals can help reduce or prevent last-minute scrambles, reduce the manual burden on their teams, and—most importantly— better shield their organizations from potentially multi-million dollar penalties.
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About the Author
Job Title: Director, Product Management
Christy Abend has more than two decades working in the human resources and product management space, with a concentration in health and welfare benefits and a focus on employer regulatory alignment. Her background and interests facilitate her work on the ACA products offered by Equifax Workforce Solutions. She has a Bachelor of Science degree with a concentration in Human Resource Management from the State University of New York, Empire State College and also holds a SHRM-SCP certification as well as a Group Benefits Associate designation awarded by the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania.