Ready for Open Enrollment? Don’t Overlook These 5 ACA Compliance Rules
September 18, 2025
Ready for Open Enrollment? Don’t Overlook These 5 ACA Compliance Rules
The period leading up to open enrollment presents employers with a minefield of potential Affordable Care Act (ACA) compliance missteps. Knowing the pitfalls allows you to proactively avoid or correct them before they result in significant financial penalties, disruptions to benefit enrollment, and employee dissatisfaction.
Here are 5 of the most common and costly mistakes to avoid:
Error #1: Misclassifying Full-Time Employees
The ACA defines a full-time employee as one who works 30 or more hours per week or 130 hours or more per month. If your company defines full-time differently, be sure to use the ACA’s definition rather than your own.
The wrong definition can lead to 1) applying the complex monthly or look-back measurement measures improperly, and 2) failing to make the required offer of coverage to eligible employees. If you misclassify an employee and they obtain a subsidy for an Exchange plan, you could face significant monetary penalties under the ACA’s employer shared responsibility provision.
Error #2: Misidentifying Your Status as an Applicable Large Employer (ALE)
Your ALE status is based on the average size of your labor force during the prior calendar year. If you employed an average of 50 or more full-time workers, including full-time equivalent (FTE) employees, you’re considered an ALE and must offer ACA-compliant health insurance to at least 95% of full-time employees and their dependents.
Employers can easily undercount their full-time employees and mistakenly believe they aren’t subject to ACA compliance and reporting requirements. What trips them up is counting only the employees at their location.
As you tally up the size of your staff, be sure to aggregate employees across all entities controlled by the same parent company, the same individual, or the same group of individuals. If the average number exceeds the ACA threshold, you may be part of what’s known as an Aggregated ALE Group and subject to the ACA employer mandate and the compliance reporting obligations (Forms 1094-C and 1095-C).
There are major monetary penalties for failing to offer coverage and non-filing due to misclassification of ALE status.
Error #3: Failing to Ensure the Health Plan Meets the ACA Standards
To comply with the Employer Shared Responsibility provisions, an ALE must offer health benefits that meet the coverage, value, and affordability standards mandated by the ACA:
- Minimum Essential Coverage (MEC) is typically met in the form of an employer-sponsored group health plan.
- Minimum Value requires covering at least 60% of the total cost of allowed benefits.
- Affordability is measured against the employee’s required contribution for self-only coverage of the lowest cost minimum value plan.
Watch out for pitfalls associated with determining affordability. In 2025, the employee contribution cannot exceed 9.02% of the employee’s household income. If you don’t know the employee’s household income, be sure to use one of the three allowable safe harbor methods to substantiate affordability calculations and mitigate penalty risk.
Error# 4: Failing to Distribute the Summary of Benefits and Coverage (SBC) With All Open Enrollment Materials
A critical mistake that many employers make is failing to distribute the SBC at the same time as all open enrollment application documents. Timely distribution is essential, as the SBC helps employees make informed health plan choices by explaining and comparing the benefits and costs of their options.
Willful failure to distribute the SBC in a timely way can result in monetary penalties levied by the Department of Labor Department of Health and Human Services and IRC excise taxes.
Error #5: Ignoring State Mandates
Employers in California, Massachusetts, New Jersy, Rhode Island, and the District of Columbia must comply with state health plan compliance mandates.
Check to see if your state has additional requirements over and above what’s mandated by the Federal government. Understand the state rules and monitor related legislative changes that can impact them with little warning.
Simplify Your ACA Compliance and Avoid Penalties
In general, employee benefits compliance is heavily enforced and penalties for violations have been increasing each year. This is particularly true for ACA compliance.
By partnering with Daybright, employers can navigate the open enrollment period with greater confidence and accuracy, thereby mitigating ACA compliance risk and avoiding penalty charges that negatively impact the bottom line.
Daybright Financial provides integrated solutions that simplify ACA compliance and reporting, such as employee tracking, plan testing, and electronic filing, not to mention plan communications and enrollment.
All our services are backed with easy-to-use technology, which is custom-built to monitor and collect data, speed administrative compliance tasks, remove data security challenges, and ensure privacy and accurate reporting.