ACA Enforcement: What to Expect from the IRS in 2025

ACA Enforcement: What to Expect from the IRS in 2025

As we approach 2025, employers across the United States must stay vigilant in their efforts to comply with the Affordable Care Act (ACA). The IRS will continue to enforce compliance, and businesses that fail to meet the ACA’s stringent reporting and coverage requirements may face significant penalties. For many organizations, the complexity of ACA compliance has made tracking and reporting employee health coverage an ongoing challenge. This is where reliable tools like ACA-Track can provide much-needed support in navigating the ACA’s intricate rules and regulations.

In this blog post, we’ll break down what you can expect from the IRS regarding ACA enforcement in 2025, the responsibilities of employers, and how leveraging solutions like ACA-Track can ensure your business remains compliant without the stress of dealing with hefty fines and penalties.

What Does ACA Compliance Mean for Employers?

The Affordable Care Act (ACA), which came into effect in 2010, requires applicable large employers (ALEs) to offer affordable and adequate health insurance to full-time employees. Failure to do so can result in penalties under Section 4980H of the Internal Revenue Code. ACA’s employer mandate applies to organizations with 50 or more full-time employees (or full-time equivalent employees), and these businesses must adhere to several key requirements:

• Offer Affordable Health Coverage: Employers must offer health insurance to their full-time employees (and their dependents) that meets the ACA’s affordability and minimum value requirements.

• Track Employee Hours: Employers must track employee hours worked, especially for variable-hour and part-time employees, to determine whether they are eligible for coverage.

• ACA Reporting: Employers are required to file IRS Forms 1094-C and 1095-C to report on employee health coverage. Failure to file these forms accurately can lead to penalties.

For organizations that need assistance with ACA compliance, services like ACA-Track streamline the entire process. ACA-Track provides robust tools for tracking employee hours, generating reports, and submitting necessary documentation electronically to the IRS, simplifying an otherwise complex task.

How the IRS Will Enforce ACA Compliance in 2025

The IRS will continue to closely monitor ACA compliance, and the consequences of failing to meet ACA requirements can be severe. Here’s what employers can expect in 2025 regarding enforcement:

• Increased Audits and Penalties:
  In 2025, the IRS is expected to ramp up audits and enforcement actions against businesses that fail to comply with ACA reporting and coverage mandates. The IRS will look for errors in Form 1095-C submissions, and any discrepancies will result in penalty assessments.

  If the IRS finds that an employer has failed to offer affordable coverage or has inaccurate reporting, the employer could face penalties of up to $270 per incorrect or late form.

• Heightened Scrutiny of Full-Time Employee Status:
  The IRS will continue to scrutinize whether employers are accurately determining which employees qualify for full-time status. This is critical because the ACA’s employer mandate only applies to full-time employees, defined as those who work 30 hours or more per week on average.

  With ACA-Track, businesses can track employee hours across various departments or systems, ensuring accurate status reporting and avoiding fines for incorrect classifications.

• Non-Compliance Penalties:
  The IRS will assess penalties for non-compliance based on the number of employees not offered coverage. In 2025, the penalties are expected to remain steep:

  • $2,000 per full-time employee for not offering coverage (excluding the first 30 employees).

  • $3,000 per full-time employee who receives a premium subsidy through the Health Insurance Marketplace due to inadequate coverage.

  Employers that do not adequately track hours worked or offer coverage to eligible employees risk these penalties, making it imperative to maintain comprehensive and accurate records. ACA-Track can help mitigate this risk by automatically calculating eligibility thresholds and sending alerts when employees exceed these limits.

• IRS 226-J Penalty Letters:
  If your business is flagged for non-compliance, you may receive an IRS 226-J penalty letter. This letter outlines the penalties your business faces and requires a response. Failing to respond or dispute the penalty within the designated timeframe can result in the IRS taking further action, including assessments.

  ACA-Track’s solution makes responding to these letters easier by maintaining an audit trail of all ACA-related data and offering a simple way to review employee coverage status and reporting.

The Role of ACA-Track in ACA Compliance

For employers who want to stay ahead of potential ACA issues, investing in a robust solution like ACA-Track is a smart choice. ACA-Track offers a proven ACA compliance solution that streamlines the tracking, reporting, and error correction processes, allowing employers to focus on their business operations rather than on the complexity of ACA compliance.

Here’s how ACA-Track can help your organization in 2025:

• Accurate Employee Hour Tracking:
  ACA-Track collects actual hours worked from various data sources, such as timekeeping systems, payroll data, and manual timesheets. This is crucial for employers who have variable-hour or part-time workers. Without proper tracking, employers risk facing penalties for misclassifying employees or failing to offer coverage when required.

• Monthly Line Code Audits for 1095-C Forms:
  ACA-Track conducts monthly audits of your 1095-C forms, ensuring that all information is accurate and compliant with the IRS’s reporting requirements. If any discrepancies or errors are found, the system helps you make the necessary corrections before submitting the forms to the IRS, reducing the risk of penalties.

• 1094-C & 1095-C Reporting:
  ACA-Track’s automated reporting features allow businesses to generate and file 1094-C and 1095-C forms electronically with the IRS, which simplifies the filing process and ensures timely submissions. This is especially beneficial for large employers, who must file electronically by law.

• Fixed ACA Reporting Errors:
  In the event of an ACA reporting error, ACA-Track helps identify and correct mistakes, preventing unnecessary penalties. Whether the issue is related to eligibility, affordability, or offer of coverage, ACA-Track’s error correction capabilities can save your business from costly fines.

• Customizable Dashboard & User Interface:
  ACA-Track allows employers to customize their dashboard to display the most relevant data, making it easier to monitor employee hours, eligibility, and coverage offers in real time. This ensures that you can track all your ACA compliance data at a glance.

• Security & Data Protection:
  ACA-Track is built with a high level of security, ensuring that sensitive employee data is encrypted and protected. The platform’s compliance with SOC 2 Type 2 and SSAE 16 standards ensures that all data is handled securely, reducing the risk of data breaches.

What You Need to Do in 2025 to Ensure ACA Compliance

To avoid penalties and remain compliant with ACA requirements in 2025, employers should:

• Track Employee Hours Accurately: Make sure you track all employee hours, especially for part-time and variable-hour employees, as this data is essential in determining ACA eligibility.

• File 1095-C Forms Promptly: Ensure timely and accurate filing of ACA forms to the IRS. ACA-Track can assist with generating and submitting the forms electronically, ensuring compliance with IRS deadlines.

• Monitor Changes in Employee Status: Stay on top of changes in employee eligibility, such as promotions, demotions, or terminations, that might affect ACA reporting.

• Respond to IRS Notices Quickly: If you receive an IRS 226-J letter or any other notice, act swiftly to resolve the issue. ACA-Track’s data repository can help you gather the necessary information to address the IRS’s concerns.

• Consult with a Dedicated ACA Compliance Advisor: Working with an ACA compliance expert or using a solution like ACA-Track with a dedicated Client Success Advisor can ensure your company is taking the right steps to remain compliant and avoid penalties.

Conclusion

As ACA enforcement continues to tighten in 2025, it’s more important than ever for employers to maintain accurate records, track employee hours, and file ACA-related forms correctly. By leveraging ACA-Track, businesses can simplify ACA compliance and reduce the risk of facing expensive fines and penalties.

With ACA-Track’s comprehensive ACA compliance services—ranging from monthly audits of 1095-C forms to secure data management and error correction—you can be confident that your organization is meeting all necessary ACA requirements, avoiding penalties, and staying prepared for any future IRS audits.