The Affordable Care Act requires employers with 50 or more full-time equivalent employees to offer affordable, minimum value health coverage — or face penalties that can reach hundreds of thousands of dollars per year. Buffer monitors your ACA compliance, manages measurement periods, and handles 1094-C/1095-C reporting as part of ongoing plan administration.
Start Your Free Assessment →The Affordable Care Act's Employer Shared Responsibility provisions — commonly called the Employer Mandate — require Applicable Large Employers (ALEs) to offer health coverage that meets two tests: affordability and minimum value. Employers that fail either test face significant IRS penalties.
An Applicable Large Employer is any company that employed an average of 50 or more full-time equivalent employees during the prior calendar year. Full-time means averaging 30 or more hours per week. Part-time hours are aggregated — so even if you have fewer than 50 full-time employees, the combined hours of your part-time and seasonal workforce can push you over the ALE threshold.
The IRS enforces the mandate through annual reporting — Forms 1094-C and 1095-C — which every ALE must file regardless of whether it offers coverage. Penalties are assessed after the fact, often 12 to 18 months after the plan year ends, when employers receive Letter 226-J from the IRS proposing the assessment.
ACA penalties are not theoretical — the IRS has issued billions of dollars in Letter 226-J penalty assessments since enforcement began. Here is what is at stake.
Penalty A triggers when an ALE fails to offer minimum essential coverage to at least 95% of full-time employees. The penalty applies to all full-time employees minus the first 30 — even those who were offered coverage.
Penalty B triggers when coverage is offered but fails affordability or minimum value tests. This penalty is assessed only for each employee who actually enrolls in a marketplace plan and receives a premium tax credit.
IRS enforcement has accelerated. Letter 226-J penalty proposals have increased significantly year over year. Many employers do not realize they owe penalties until they receive the letter — by which point the window to respond is only 30 days.
Penalty amounts are indexed annually for inflation. The amounts shown are 2024 indexed figures. They increase each year, making non-compliance progressively more expensive.
Source: IRS, IRC Section 4980H. Penalty amounts adjusted annually per Notice 2023-75 and subsequent guidance.
ACA compliance is not a separate engagement — it is built into how Buffer manages your employer benefits. Here is what we handle as part of ongoing plan administration.
We calculate your full-time equivalent count using the IRS methodology — aggregating part-time hours, accounting for seasonal workers, and applying controlled group rules when multiple entities are involved.
We configure standard or look-back measurement periods for variable hour and seasonal employees. Proper measurement periods determine which employees must be offered coverage and when — errors here are the most common source of penalty exposure.
We apply the IRS safe harbor methods — W-2, Rate of Pay, and Federal Poverty Level — to verify that employee contributions meet affordability thresholds. We identify the most advantageous safe harbor for each employee classification.
Buffer's complimentary benefits platform generates Form 1095-C for every full-time employee, with the correct offer codes, safe harbor codes, and coverage months populated automatically from enrollment data.
We prepare and review the transmittal form (1094-C) that accompanies the batch filing to the IRS, including aggregate employer-level data, transition relief indicators, and ALE member information.
If the IRS issues a penalty assessment, Buffer helps you respond within the 30-day window — reviewing the proposed penalties, identifying reporting errors, and assembling the documentation needed to dispute inaccurate assessments.
Many employers do not realize they are an ALE, or that their current coverage fails the affordability test. These are the situations that create the most exposure.
If you have 40 or more employees — including part-time workers — you may already be an ALE without knowing it. Part-time hours are aggregated into FTEs, and seasonal workers count in most cases. A company with 35 full-time employees and 30 part-time employees working 20 hours per week is an ALE.
Restaurants, staffing companies, retail, and healthcare employers with fluctuating schedules face the most complex measurement period requirements. Misclassifying a variable hour employee as part-time — when their hours actually average 30 per week — is a direct path to Penalty A exposure.
If your employees pay more than 9.12% of their income toward self-only coverage, the plan fails the affordability test. This is especially common for lower-wage employees where even a modest employee contribution exceeds the threshold relative to their pay.
The IRS treats commonly owned businesses as a single employer for ALE purposes. An owner with three companies of 20 employees each has a 60-employee ALE — even if no single entity reaches 50. Controlled group rules are frequently missed and are a major source of unexpected penalty assessments.
Buffer evaluates your ALE status and compliance posture during every free benefits assessment. If you are uncertain whether you are subject to the employer mandate, that is exactly the kind of question we answer before it becomes a penalty.
Direct answers to the ACA compliance questions employers ask most.