As the calendar turns to September, Affordable Care Act compliance planning should shift to the forefront of your organization. The IRS has released its penalty amounts for the 2025 tax year and is expected to provide Affordability Safe Harbors this fall.
Thus, there will be some additional clarity to go along with concrete filing deadlines for employers. Starting early will better prepare your organization for success but there are a myriad of challenges to compliance.
Our research highlights some of the most common challenges to ACA compliance that employers face and why.
Common ACA Compliance Challenges
Trusaic’s survey of 244 professionals tasked with ACA compliance at their organization revealed 73% find it burdensome. Compliance with ACA regulations is less of a burden for organizations with mainly white collar workers or high-wage full-time salaried workers where an offer of health insurance is made right away. However, various challenges still remain for those organizations.
Overall, one in four respondents said they have been audited by the IRS for potential ACA non-compliance.
It is harder for organizations with lower-paid variable hour workers where there are low levels of participation in the organization’s health plan.
In the survey, slightly more than half of respondents said compliance is easy or very easy, with the remainder reporting moderately difficult, difficult or very difficult. The takeaway is that for many organizations with a varied and/or low hourly paid workforce, compliance is a difficult process and will require a requisite amount of effort to get right.
Common challenges that organizations face with ACA compliance include:
- Lack of clarity of the rules
- So many elements to track
- Complicated situations
- Need to check coding
- The amount of time
- The fact that it is done at a very busy time
- The lack of staff to do it
- The tight deadline
The number and range of challenges teaches us that there isn’t a simple fix for the person responsible for compliance. They need support, along with the right processes and technology, to get the work done correctly and finished in time to submit.
Survey respondents indicated the following activities take the most time:
- Verifying the information is accurate
- Educating employees
- 1095-C preparation
- Understanding the complex rules
- Keeping up with changing rules
- Entering information
- Dealing with affordability rules
The most common compliance problem is employee misclassification, etc. More than half the respondents have encountered this problem.
The next most common compliance problems are determining ACA affordability and additional state requirements. Five jurisdictions (California, New Jersey, Rhode Island, Washington D.C., and Massachusetts) have ACA reporting requirements over and above what is required by the federal government.
Practical Solutions
With respect to ACA compliance, the first step for any HR department is to make a rough assessment of the scale of challenge they face. In organizations with a well-paid white collar workforce ACA compliance could be more straightforward, but our research indicates there are still various hurdles to overcome. Other organizations, particularly those with many lower paid, variable hour workers are likely to face a serious challenge.
For organizations faced with this challenge, the three most common approaches for ensuring ACA compliance are:
- Included with payroll
- In-house ACA compliance team
- Outsourced to ACA compliance vendor
Note that these are not mutually exclusive, it’s common for organizations to outsource compliance but still have an in-house team. For instance:
- 59% of respondents said they have a dedicated internal team
- 40% said they outsource to ACA compliance experts
- 32% said they use ACA compliance software
- 30% said they have a dedicated external team.
The most important lessons from the data are:
- Companies are far less likely to rely on payroll, 51% are currently using this approach but only 28% want to use it in the future.
- Companies are more likely to outsource to ACA compliance experts, 32% are currently using this approach, but 40% want to use it in the future.
- Companies are more likely to use an in-house ACA compliance team, 44% are currently using this approach, but 57% want to use it in the future.
A summarized version of feedback surveyed HR professionals provided for how to comply with the ACA boiled down to: “be especially systematic and careful in your compliance work” and “get the support such as experts, software and outsourcing that you need.”
Leverage a Vetted and Experienced Partner
The burden of ACA compliance shows up quantitatively in the number of hours it takes to comply. Almost 70% spend more than 80 hours a year on ACA compliance — and it is easy to underestimate the number of hours involved because of the constant checking of data that eats up time all year long.
The point of tracking the hours involved is to provide a basis for deciding if investing in better software or an outsourcing solution makes sense. Any HR professional who is spending more than 80 hours on ACA compliance can make a good case that there will be a positive return on investment from outsourcing.
Furthermore, the labor costs involved are not the only reason for outsourcing, an even more compelling reason is to reduce the risk of fines, which can accumulate in the millions. And the IRS is aggressively pursuing non-compliance with increased efficiency.
Trusaic’s ACA solution provides streamlined employer reporting and compliance. Since employers were first required to comply with the ACA’s Employer Mandate in 2015, we’ve helped our clients save over $1 billion in ACA penalty assessments.
Since employers were first required to comply with the ACA’s Employer Mandate in 2015, we’ve helped our clients save over $1 billion in ACA penalty assessments.
Experience unmatched ACA compliance service and support with our ACA Complete® solution. We deliver everything you need to track, prepare, furnish, file, and defend your ACA compliance.
