How to Get ACA Compliance Right for Your Organization

The Affordable Care Act (ACA) requires businesses to provide health insurance to at least 95% of employees. The purpose of the ACA is to provide adequate health insurance to uninsured—or underinsured—employees.

If your company doesn’t meet the ACA compliance requirements, you could face legal IRS penalties. This is why it’s important to understand ACA guidelines, as well as any reporting requirements.

In this guide, we’ll give you an overview of the ACA rules and how the ACA affects your business, so you can support your people while protecting your organization from risk.

If you’re looking for an easy, integrated tool to help you with compliance, BambooHR partners with a full-service ACA Reporting Service to help you meet the guidelines and avoid any penalties.

Key Takeaways for ACA Compliance

ACA reporting and compliance is important for businesses. If you’re found to be noncompliant, you risk receiving a fine or penalty and may risk damaging your reputation.

Here are the top definitions and requirements to keep in mind:

• Applicable large employers (ALEs): You need to be ACA compliant if you had more than 50 full-time or full-time equivalent employees in the last year.
• Full-time employees: Under the ACA, an employee is classed as full-time if they work more than 30 hours a week.
• Relevant documents: You need to report that you’ve met the minimum ACA requirements annually to the IRS using forms 1095-C and 1094-C.
• Affordable coverage: For the IRS, affordable health insurance means employee premiums aren’t over 9.5% (adjusted yearly for inflation) of the employee’s annual household income.

What Is ACA Reporting?

ACA reporting is the practice of employers and insurers reporting employee health insurance information to the IRS. This should be submitted as part of your company’s annual 1095-C and 1094-C tax forms.

The purpose of ACA reporting is to ensure that a company offers health insurance to their employees, provided they meet the following criteria:

• The company has had at least 50 full-time, or full-time equivalent, employees in the last year.
• At least 95% of employees are eligible to sign up for the company’s health plans.
• Plans meet the minimum legal level of health coverage and value.
• The health insurance plans must be “affordable,” meaning employees premiums are less than 9.02% of their household income (adjusted for 2025).

What Is Minimum Essential Coverage (MEC)?

Minimum essential coverage (MEC) is a legally defined minimum level of health insurance you need to offer to your employees. Essentially, it includes most types of health insurance plan except for the following:

• Dental or vision plans
• Workers’ compensation plans
• Coverage limited to specific conditions
• Any other type of limited coverage

The Importance of Adhering to ACA Reporting Requirements

ACA reporting is the responsibility of a company. As an employer, it’s your responsibility to remain compliant with federal law. You also need to provide a certain level of care for your employees, as per the ACA.

Here are the key reasons why you should follow the necessary ACA compliance requirements:

Employee Care

Your number one priority is your employees. Not only will happy employees often be more proactive and productive in their roles, but providing health insurance can also improve their wellbeing. By taking away the added stress of paying for expensive healthcare, it can improve their overall quality of life.

Legal Penalties and Fees

ACA compliance is a requirement by federal law. If you’re found to be noncompliant by the IRS, you could face fines, penalties, and even legal liability. Getting your ACA reporting right can help avoid running into these tricky situations later down the line.

Reputation

As well as fines and penalties hurting your business profits, liability claims and poor employee experiences can also damage your reputation. Employee trust and loyalty is important when building a strong internal workforce and culture.

This can then positively or negatively reflect on your external reputation, especially if employees spread the positive word about their workplace—or on the other hand, unhappy employees can put a big dent in your brand.

News travels fast, and in the long term, this can affect your brand perception among other businesses, clients, and consumers.

How to Fulfill ACA Compliance Requirements

You need to file the 1095-C and 1094-C forms with the IRS every year to fulfill your ACA compliance requirements. You also need to provide copies to your full-time and self-insured employees.

What ACA compliance looks like for your company will vary depending on the type of coverage required. Here are some of the most important compliance considerations.

What Are the Requirements for Health Insurance Plans?

People may choose to obtain health insurance for themselves and their families, either through their employer or privately.

If you provide health insurance to your employees, it needs to meet specific requirements, including:

• Cover doctor’s appointments, prescription drug cover, and hospital care
• Cover preexisting conditions
• Allow for dependents and children to be added to the plan (until age 26)
• Be offered during an open enrollment window or special enrollment period
• Have no dollar limit on essential health benefits

How Does the ACA Apply to Smaller Businesses?

Small group coverage, also called the ​​Small Business Health Options Program (SHOP), is available to smaller businesses with up to 50 employees.

Some states allow businesses with with up to 100 employees to take part in SHOP, including:

• Vermont
• New York
• Colorado
• California

This differs from regular ACA compliance requirements, which require businesses with over 50 employees to have employee health insurance in place.

The requirements for this plan are the same as individual and family coverage.

Who Needs to Comply with ACA?

Businesses that employ more than 50 full-time or full-time equivalent employees must comply with ACA reporting requirements. These businesses are called applicable large employers (ALEs). People who work 30 hours or more per week are considered full-time employees.

What Happens If I Don’t Report ACA Compliance?

If you fail to correctly file the 1095-C and 1094-C forms every year—for example, if they’re sent late or are inaccurate—then the IRS can fine you.

To help resolve this, you’ll need to go back over your accounts, amend any incorrect or missing data, and re-send the completed forms.

You have 45 days before the IRS charges you to respond or apply to remove or reduce the penalty, if you can show reasonable cause, like mistakes based on lack of experience or complexity of the issue.