Mid-Year ACA Compliance Review

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As we reach the midpoint of the year, it’s the ideal time for HR teams to revisit Affordable Care Act (ACA) compliance responsibilities. A mid-year checkup helps ensure that your organization is on track to meet employer mandate requirements, avoid penalties, and simplify year-end reporting. This article provides a practical ACA compliance checklist tailored for Applicable Large Employers (ALEs).

1. Confirm ALE Status Start by reviewing your ALE status for the current calendar year. Employers with 50 or more full-time employees (including full-time equivalents) in the previous year are considered ALEs and are subject to the ACA employer mandate. If your organization is near the 50-employee threshold, double-check your monthly averages and continue monitoring closely in case your status changes for the upcoming year.
2. Evaluate Your Offer of Coverage Ensure you’re offering Minimum Essential Coverage (MEC) to at least 95% of full-time employees and their dependent children. The health plan must also meet Minimum Value standards covering at least 60% of total allowed costs. Review new hires, promotions, and reclassifications to verify that all eligible employees have received timely offers of coverage.
3. Check Affordability Each year, the IRS sets a new affordability threshold. For 2025, employee contributions for self-only coverage must not exceed 8.39% of an employee’s income (or equivalent under a safe harbor method). Now is a good time to verify that your lowest-cost plan remains affordable using one of the three allowed safe harbors: Federal Poverty Line
4. Rate of Pay
5. W-2 Wages

If premium rates or employee wages have changed, recalculate affordability and adjust contributions if necessary.

Review Employee Classification and Tracking

For organizations with variable-hour or part-time workers, ensure you’re correctly using the look-back measurement method to determine full-time status. Validate that timekeeping and payroll systems accurately track hours and reflect proper employee classifications. Any misclassification could lead to offer failures and potential penalties.

Prepare for Year-End Reporting

Although ACA reporting occurs early in the following year, now is the time to ensure your data is accurate and complete. Double-check that:

1. Employee names, SSNs, and hire dates are current.
2. Coverage offer data is accurately coded.
3. Documentation of any waivers, terminations, or leaves of absence is up to date.

Early preparation helps avoid filing errors and reduces the burden on HR at year-end.

Monitor for IRS Notices

Keep an eye out for IRS Letters such as:

• Letter 226J (proposed penalties under the Employer Shared Responsibility provisions)
• Letter 5699 (requesting ACA filing verification)

If you’ve received any notices, ensure you’ve responded appropriately and documented all communication. If no notices have been received, this is still a good time to confirm that prior reporting was complete and accurate.

Plan Ahead for Open Enrollment

If your organization plans to change health plan options or employee contributions during open enrollment, consider how those changes may impact ACA compliance. Ensure new plans still meet MEC, Minimum Value, and affordability standards. Document any updates early and plan employee communications accordingly.

Final Thoughts

Conducting a mid-year ACA compliance review helps your organization stay ahead of regulatory requirements, reduce penalty risks, and create a smoother experience during year-end reporting. HR professionals who approach compliance proactively are better positioned to support their organizations and employees year-round.