When the Affordable Care Act (ACA) was signed into law in March 2010, it transformed healthcare access for millions of Americans. It also imposed requirements on Applicable Large Employers (ALEs) and on self-insured employers of any size.  

Who is considered an ALE?

Employers with 50 or more full-time employees, including full-time equivalent (FTE) employees during the previous calendar year, are considered ALEs. FTE is a way of adding hours for full time, part time and other various types of employees into measurable full-time units. For example, two part-time employees who each work 20 hours a week would be considered one FTE.

The ACA defines a full-time employee as an employee who works an average of at least 30 hours per week or 130 hours of service in a calendar month.

Key ACA Compliance Requirements:

• Employers considered an ALE must offer the minimum essential coverage (MEC) to at least 95% of full-time employees and their dependents. The MEC must both be affordable and meet minimum value standards. 
• Employers must file Internal Revenue Service (IRS) Forms 1094-C and 1095-C by the required deadlines each year (see deadline information below).  Form 1095-C is filed for each employee who worked at least one month during the calendar year.  Form 1094-C is a summary form of all 1095-C forms and certification that coverage was offered to 95% of employees. 
• Employers must provide a Summary of Benefits and Coverage (SBC). The SBC must follow a standardized format issued by the Department of Labor (DOL).

ACA Reporting Deadlines for Employers:

• A copy of the IRS Employee Form 1095-C, upon employee request, is due March 2, 2026
• IRS Forms 1094-C & 1095-C are due March 31, 2026

Key ACA Compliance Updates for 2026:

• There are increased Employer ACA Penalties under the Employer Shared Responsibility Provisions for 2026:
• $3,340 penalty per employee for failure to offer MEC
• $5,010 penalty per full-time employee for failure to provide affordable coverage
• The affordability threshold is adjusted annually by the IRS. In order for a health plan to be considered affordable, coverage must not exceed the IRS specified percentage for monthly household income. In 2026, the Affordability Threshold will increase to 9.96%, up from 9.02% in 2025.  
• The enhanced premium tax credits, introduced during COVID, lowered premiums for ACA marketplace plans and capped premium costs which expanded eligibility. These tax credits are set to expire December 31, 2025. Compliance implications for ALEs are IRS penalty risk and increased number of employees seeking employer health coverage as the marketplace becomes less affordable.
• The IRS amended the Paperwork Burden Reduction Act (PBRA) and the Employer Reporting Improvement Act. Changes include:
• The change allows employers to provide Form 1095-B to individuals only upon request. The PBRA extended the same flexibility to Form 1095-C.
• Employers must prominently post a notice on the employer’s or plan sponsor’s website that is reasonably accessible to all individuals who would be entitled to receive the ACA Statements. This requirement may include terminated employees and retirees.
• Employers and insurers may substitute an individual’s date of birth for their taxpayer identification number (TIN) if the TIN is unavailable.
• Employers now have 90 days, up from 30 days, to respond to IRS Letter 226J, which notifies them of potential penalties for failing to offer affordable coverage.

ACA Compliance Best Practices

• Accurately track employee hours worked to determine eligibility
• Annually review health plan affordability and coverage
• Provide a summary of benefits and coverage (SBC) at required intervals
• Certain states may have additional reporting obligations
• File IRS forms by respective deadlines
• Post a clear notice for Form 1095-C requests
• Respond to IRS notices promptly
• Use ACA compliant systems

ACA compliance doesn’t have to be overwhelming. With the right strategy and awareness of updates, employers can protect their business, support their workforce and avoid penalties. Stay informed, stay organized and stay compliant.

Have questions about ACA changes? Get in touch with a dedicated isolved HR professional. 

^{Disclaimer. The information provided herein is for general informational purposes only and is not intended to be legal, investment or tax advice. It is not a substitute for professional legal, investment or tax advice, and you should not rely on it as such. No attorney-client or accountant-client relationship or any other kind of relationship is formed by any use of this information. The effective date of various provisions, amendments, and regulatory guidance may impact eligibility. The accuracy, completeness, correctness or adequacy of the information is not guaranteed, and isolved assumes no responsibility or liability for any errors or omissions in the content. You should consult with an attorney, investment professional or tax professional for advice regarding your specific situation.} 

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