Stop letting ACA compliance slip through the cracks. Every month I work with businesses that thought they were compliant - until they received a CP220J notice demanding hundreds of thousands in penalties.
Here's the reality: your ACA compliance checklist determines whether you face devastating financial penalties or operate with confidence. After nearly a decade helping mid-sized employers navigate the shared responsibility provision, I've seen the same compliance gaps destroy otherwise successful businesses.
What separates penalty-free employers from those facing IRS enforcement? https://www.1095ez.com/sign-up every applicable large employer must meet. This comprehensive ACA compliance checklist covers every critical element - from determining applicable large employer status to filing accurate Forms 1095-C and 1094-C on time.
Use this checklist as your roadmap. Each item includes specific actions, deadlines, and resources to keep your business compliant and penalty-free throughout 2025.
Why Most ACA Compliance Efforts Fall Short
The truth is uncomfortable: most employers approach ACA compliance backward. They focus on forms first, deadlines second, and employee eligibility last. This creates a dangerous cycle where businesses scramble to meet filing requirements without understanding the underlying compliance obligations.
I see this pattern repeatedly in my consulting work. Companies invest in expensive payroll software, hire additional HR staff, and still face penalty notices. Why? Because ACA compliance isn't about having the right tools - it's about following the right process.
The shared responsibility provision operates on a simple principle: provide qualifying health coverage to your full-time employees, or pay penalties. Yet most employers struggle with three fundamental areas that derail their compliance efforts.
First, they miscalculate applicable large employer status. This isn't a static determination - it changes annually based on your prior year workforce. Miss this calculation, and you might ignore compliance requirements entirely or apply them when unnecessary.
Second, they misidentify full-time employees. The ACA uses specific measurement periods and stability periods that don't align with traditional employment categories. Getting this wrong affects both coverage obligations and penalty calculations.
Third, they treat forms filing as separate from compliance strategy. Forms 1095-C and 1094-C aren't just reporting requirements - they're legal documentation of your compliance position. Errors here create liability even when your actual coverage was compliant.
That's why this healthcare compliance checklist addresses the complete cycle: determination, measurement, coverage, reporting, and response preparation. Because true compliance means confidence in every aspect of your ACA obligations.
The Complete ACA Compliance Checklist: Every Requirement Covered
This employer mandate checklist covers every critical compliance requirement in logical sequence. Work through each section systematically - skipping steps creates gaps that lead to penalties.
Step 1: Determine Applicable Large Employer (ALE) Status
- Calculate your prior year workforce - Count all employees (full-time and part-time) for each month of the prior calendar year
- Apply the full-time equivalent formula - Divide total part-time hours by 120, then add full-time employee count
- Use the 50-employee threshold correctly - Average monthly workforce of 50+ makes you an ALE for the current year
- Account for controlled groups and affiliates - Include related entities under common ownership in your calculation
- Document your determination - Maintain records showing how you calculated ALE status
Step 2: Identify Full-Time Employees
- Establish measurement periods - Use either standard measurement method or look-back measurement method consistently
- Track hours accurately - Monitor actual hours worked, including overtime and leave time
- Apply the 30-hour rule properly - Employees averaging 30+ hours per week qualify as full-time
- Handle variable hour employees - Use 12-month look-back periods to determine status for new variable hour staff
- Manage stability periods correctly - Once determined, full-time status generally remains stable for the entire plan year
Step 3: Provide Qualifying Coverage
- Verify minimum essential coverage - Ensure your health plan meets ACA requirements for essential health benefits
- Test affordability annually - Employee contribution cannot exceed 9.12% of household income (use safe harbor methods)
- Confirm minimum value requirements - Plan must cover at least 60% of covered health expenses
- Extend dependent coverage appropriately - Offer coverage to dependent children up to age 26
- Manage waiting periods properly - Maximum 90-day waiting period for eligible employees
Step 4: Track and Document Everything
- Maintain detailed hour records - Document actual hours worked for all employees throughout the year
- Record coverage offers and enrollments - Track when coverage was offered, to whom, and enrollment decisions
- Document affordability calculations - Maintain records showing how you determined coverage affordability
- Keep termination and rehire records - Document employment changes that affect coverage obligations
- Preserve measurement period determinations - Maintain records of how full-time status was determined for each employee
Step 5: Prepare Accurate Forms Filing
- Gather complete employee data - Collect names, addresses, Social Security numbers, and coverage information
- Calculate monthly coverage codes accurately - Use correct Line 14 codes to describe coverage offers for each month
- Apply safe harbor codes properly - Use Line 16 codes when applicable to demonstrate affordability safe harbor
- Complete Form 1094-C transmittal correctly - Summarize your ALE status, employee counts, and coverage information
- Validate data before filing - Review all forms for accuracy and completeness before submission
Step 6: Meet Critical Deadlines
- Distribute employee statements by January 31 - Provide Form 1095-C to all full-time employees
- File with IRS by March 31 - Submit Forms 1094-C and 1095-C (April 1 if filing electronically)
- Request extensions if needed - File Form 8809 for automatic 30-day extension
- Respond to correction requests promptly - Address IRS notices and correction requests within specified timeframes
- Plan for next year requirements - Begin tracking and preparation for following year compliance
Step 7: Prepare for IRS Enforcement
- Understand penalty calculations - Know how 4980H(a) and 4980H(b) penalties are calculated
- Maintain complete penalty defense records - Document coverage offers, affordability determinations, and employee responses
- Prepare for potential notices - Understand CP220J letters and Letter 226J processes
- Know your response options - Understand how to respond to penalty assertions with supporting documentation
- Consider professional support - Have relationships with ACA compliance experts for complex situations
Each item in this ACA reporting checklist builds on the previous steps. Complete them in sequence to ensure comprehensive compliance coverage throughout the year.
Critical Deadlines That Can Cost You Thousands
Time kills ACA compliance. Miss one deadline, miscalculate one requirement, ignore one filing obligation, and you're facing penalties that can reach $4,320 per employee annually. The stakes escalate quickly because ACA penalties multiply across your entire workforce.
Consider the cascading impact: if you're an applicable large employer with 200 employees and fail to offer minimum essential coverage, you face the 4980H(a) penalty - $2,880 per full-time employee (minus the first 30). That's potentially $489,600 for a single year of non-compliance.
But here's what makes ACA deadlines particularly dangerous - they're unforgiving. Unlike other tax obligations where you might negotiate extensions or payment plans, ACA penalty notices arrive with specific timelines for response. When you receive a CP220J or Letter 226J, you typically have 30 days to respond with complete documentation.
The penalty timeline looks like this: First, the IRS reviews your filed forms against individual tax returns to identify coverage gaps. Then they issue preliminary penalty calculations based on their analysis. Finally, they provide a narrow window for you to respond with contrary evidence.
What happens if you miss the response deadline? You lose your opportunity to contest the penalties. The IRS assessment becomes final, and you're liable for the full amount plus interest. I've watched businesses pay hundreds of thousands in penalties that could have been avoided with proper documentation and timely response.
The most expensive mistakes I see are simple ones: failing to document coverage offers that were actually made, using wrong coverage codes on forms, or missing the employee statement deadline. Each creates penalty liability that could have been prevented.
That's why this compliance checklist emphasizes documentation and deadlines equally. You need both accurate compliance and accurate reporting to avoid penalties. Miss either element, and you're exposed to IRS enforcement regardless of your actual coverage practices.
Remember - ACA penalties aren't just financial. They create ongoing compliance burdens, potential audits, and operational disruption that affects your entire business. The time to address compliance gaps is now, before they become penalty liability.
Take Action on Your ACA Compliance Today
This ACA compliance checklist gives you the roadmap - now you need to walk the path. Every day you delay compliance review is another day of potential penalty exposure.
Start with Step 1 today. Calculate your applicable large employer status for the current year. If you're unsure about any calculation or requirement, don't guess. The cost of professional guidance is minimal compared to penalty risk.
At 1095 EZ Online, we've helped hundreds of employers work through this exact checklist and achieve confident compliance. Whether you need help with forms filing, penalty response, or comprehensive compliance strategy, we provide the expertise and tools to keep your business penalty-free.
Ready to eliminate your ACA compliance uncertainty? Contact us today for a consultation, or use our self-service platform to get started with accurate forms filing and compliance tracking.
Your compliance confidence starts with taking the first step. Don't wait for a penalty notice to take action.