The Affordable Care Act (ACA) continues to evolve, and staying compliant is essential for businesses offering health benefits to employees. With new regulations, updated affordability thresholds, and reporting requirements, employers must stay informed to avoid costly penalties and ensure they provide the right coverage.
Who Needs to Comply with the ACA?
The ACA primarily affects Applicable Large Employers (ALEs)—companies with 50 or more full-time or full-time-equivalent (FTE) employees. ALEs are required to:
- Offer affordable, minimum essential coverage (MEC) to at least 95% of full-time employees and their dependents.
- Ensure coverage meets the minimum value standard, meaning it covers at least 60% of total healthcare costs.
- Accurately report health plan offerings to the IRS via Forms 1094-C and 1095-C.
Even if your business isn’t classified as an ALE, understanding ACA requirements can help you stay competitive in the job market by offering attractive benefits.
Key ACA Updates for 2025
- New Affordability Threshold for Employer-Sponsored Plans
The ACA defines “affordable” coverage as a percentage of an employee’s household income. In 2025, this threshold may change (pending IRS updates). In 2024, it was 8.39% of an employee’s household income—a historically low percentage. Employers must adjust their contributions accordingly to avoid employer shared responsibility (ESR) penalties.
What to do: Review your premium contributions to ensure compliance with the new threshold once it is announced.
- Increased IRS Penalties for Non-Compliance
ACA non-compliance penalties increase annually based on inflation. Employer Shared Responsibility Penalties (ESRP) for 2025 (projected based on previous adjustments):
- Penalty A (for not offering coverage to 95% of full-time employees): Could exceed $2,970 per employee annually.
- Penalty B (if coverage is unaffordable or doesn’t meet minimum value): Could exceed $4,460 per affected employee annually.
What to do: Conduct an internal audit to ensure you’re meeting ACA requirements and avoid penalties.
- 1094-C and 1095-C Reporting Deadlines
Employers must file Forms 1094-C and 1095-C to the IRS and distribute 1095-C forms to employees. Projected 2025 ACA Reporting Deadlines:
- Forms 1095-C to Employees: March 3, 2025
- Paper Filing with IRS: February 28, 2025
- Electronic Filing with IRS: April 1, 2025 (Mandatory for employers with 10+ forms)
What to do: Double-check reporting requirements and work with your payroll/HR system to streamline filings.
- State-Specific ACA Mandates
Some states have individual mandates requiring residents to maintain health coverage, meaning employers may have additional state-specific reporting responsibilities. States with their own reporting rules: California, New Jersey, Rhode Island, Vermont, Massachusetts, and Washington, D.C.
What to do: If you have employees in these states, verify your state-specific ACA compliance requirements.
- Expanded IRS E-Filing Requirements
The IRS now requires all employers filing 10 or more forms (including ACA forms, W-2s, 1099s) to file electronically. This threshold has dropped from 250, meaning more employers must now e-file their ACA forms.
What to do: If you were previously filing on paper, ensure your system is set up for electronic submission in 2025.
How to Stay ACA Compliant in 2025
- Review Coverage Affordability – Ensure your employee premiums align with the updated affordability threshold.
- Check Full-Time Employee Status – Accurately track hours to determine ACA eligibility.
- Prepare for IRS Reporting – Gather necessary data for 1094-C and 1095-C filings early.
- Stay Updated on IRS and State Mandates – Monitor new regulations at both the federal and state levels.
- Work with an ACA Compliance Partner – Consider using a third-party administrator or benefits consultant to manage ACA compliance and avoid penalties.
Final Thoughts
ACA compliance can be complex, but with proactive planning and regular audits, you can ensure your business stays on track. Offering ACA-compliant benefits not only helps you avoid penalties but also improves employee satisfaction and retention by providing high-quality healthcare options.
At Cypress Benefit Solutions, we help businesses navigate ACA compliance with ease. Whether you need help with affordability calculations, reporting, or plan selection, we’ve got you covered.
Contact us today to ensure your benefits strategy is ACA-compliant in 2025 and beyond.
