Kyle McLemore, SVP, Operations
In an era where employers are increasingly aware of the legal and financial ramifications of benefit plan missteps, one regulatory concern continues to dominate the risk landscape: compliance with the Affordable Care Act (ACA). Despite heightened scrutiny over fiduciary duties under ERISA (Employee Retirement Income Security Act) and a surge in class-action lawsuits targeting plan mismanagement, ACA compliance consistently emerges as the top compliance worry for employers and HR professionals. So, why does the ACA continue to pose the greatest risk for many employers, and what steps can be taken to effectively mitigate these risks?
The ACA Compliance Burden Is Ongoing
The ACA might not make daily headlines like it once did, but its requirements are still very much in effect, and penalties for noncompliance can be steep. Employers subject to the employer mandate (those with 50 or more full-time equivalent employees) must:
- Offer affordable, minimum value health coverage to full-time employees and their dependents
- Accurately report coverage offers and enrollment via IRS Forms 1094-C and 1095-C
- Maintain precise tracking of employee hours to determine full-time status
Failure in any of these areas can trigger Employer Shared Responsibility Payments (ESRPs), some of which can run into the millions of dollars, particularly for large organizations.
Why ACA Risks Outweigh Fiduciary Concerns For Now
Fiduciary litigation is on the rise, especially around 401(k) plan fees, vendor performance, and plan governance. But while fiduciary risk often involves gray areas and complex legal defenses, ACA noncompliance is more black-and-white: if you didn’t offer compliant coverage or reported incorrectly, penalties are automatic and quantifiable.
ACA enforcement has also become more sophisticated. The IRS has enhanced its data-matching capabilities, cross-referencing information from Forms 1095-C, W-2s, and individual tax returns. Employers who mistakenly assume they’re flying under the radar are often shocked when Letter 226J lands in their mailbox.
Common ACA Compliance Pitfalls
Employers continue to fall into several traps, including:
- Misclassifying variable-hour or seasonal employees
- Relying on manual processes for tracking eligibility and offer status
- Missing filing deadlines or submitting incorrect data
- Assuming third-party vendors have it fully handled
Automation and outsourced compliance services help, but ultimate responsibility still lies with the employer. Even small reporting errors can cause big headaches.
What Employers Should Do Now and How BSI Supports Them
Given the high stakes of ACA compliance, employers should prioritize regular ACA compliance audits, focusing closely on measurement methods and offer tracking. They must also carefully review vendor contracts and performance to ensure clear accountability, stay up to date on evolving IRS guidance and emerging state reporting mandates, and invest in educating their HR and benefits teams to fully understand the ACA’s operational and reporting requirements.
At BSI, we partner with employers to simplify these complex demands by delivering thorough compliance audits, helping manage vendor relationships, providing timely regulatory updates, and offering tailored training to internal teams. While fiduciary duties remain important and continue to attract legal scrutiny, ACA compliance poses the most immediate and enforceable risk for employers today. BSI’s expert support helps clients stay vigilant, reduce risk, and confidently navigate an ever-changing regulatory environment, because preventing costly ACA missteps starts with proactive, informed action.