Open enrollment is one of the busiest times of the year for HR and payroll teams. While much of the focus is understandably on employee benefit elections, it’s also the ideal time to ensure your Affordable Care Act (ACA) tracking and reporting processes are accurate. Small mistakes made during open enrollment can create significant reporting challenges later, potentially leading to costly penalties, employee confusion and time-consuming corrections.
For applicable large employers (ALEs), ACA compliance is a year-round responsibility. The decisions made during open enrollment directly impact the accuracy of Form 1095-C, affordability calculations and employer-shared responsibility compliance. By taking a proactive approach, employers can reduce risk and streamline reporting when filing season arrives.
Common ACA Reporting Mistakes to Avoid
ACA reporting accuracy depends on several moving pieces working together throughout the year. Errors in employee eligibility tracking, affordability testing, documentation and data management can all increase compliance risk and lead to reporting corrections. Below are six common ACA reporting mistakes employers should watch for.
1. Employee Eligibility Misclassifications
One of the most frequent ACA reporting errors occurs when employees are incorrectly designated as eligible or ineligible for coverage. This can happen when:
- Variable-hour employees aren’t properly tracked.
- Measurement period calculations are inaccurate.
- Employee status changes are overlooked.
- Newly eligible employees aren’t offered coverage in a timely manner.
During open enrollment, review employee classifications carefully and confirm that eligibility determinations align with ACA requirements and company policies.
2. Inaccurate Affordability Tracking
The ACA requires ALEs to offer affordable health coverage that meets minimum value standards. Each year, affordability thresholds are adjusted, making it important to verify that employee contribution rates remain compliant. Common affordability mistakes include:
- Using outdated affordability percentages.
- Calculating employee contributions incorrectly.
- Overlooking changes in employee pay rates.
- Failing to test affordability across different employee groups.
A review during open enrollment can help identify affordability concerns before they lead to employer-shared responsibility penalties.
3. Incomplete or Inaccurate Employee Data
ACA reporting depends heavily on accurate employee records. Even minor data errors can create filing issues or trigger IRS inquiries. Review key data points, including:
- Legal names
- Social Security numbers
- Addresses
- Employment dates
- Coverage election information
Ensuring employee records are current during open enrollment reduces the likelihood of correction filings later.
4. Poor Documentation of Coverage Offers
The ACA requires employers to document when coverage was offered, to whom and under what terms. Employers may face compliance challenges when they can’t demonstrate:
- The date coverage was offered.
- Employee acceptance or waiver decisions.
- Coverage effective dates.
- Plan details and eligibility criteria.
Strong documentation practices can provide valuable protection if questions arise from employees or regulators.
5. Overlooked Mid-Year Employment Changes
Promotions, transfers, leaves of absence, reductions in hours and rehires can all have an impact on ACA reporting obligations. Open enrollment presents an opportunity to review employee status changes that occurred throughout the year and verify that benefits eligibility and reporting records were updated appropriately. Pay particular attention to:
- Employees transitioning from part-time to full-time status.
- Seasonal employees.
- Rehired employees.
- Employees returning from approved leave.
These groups often represent some of the most challenging ACA reporting scenarios.
6. Lack of Coordination Between HR, Benefits and Payroll
ACA compliance requires accurate data from multiple systems. When HR, benefits administration and payroll platforms aren’t aligned, reporting inconsistencies can occur. Examples include:
- Coverage elections not syncing properly.
- Incorrect payroll deductions.
- Mismatched employee classifications.
- Missing benefit enrollment updates.
Performing a reconciliation between systems during open enrollment can help identify discrepancies before year-end reporting begins.
Streamlined ACA Reporting Compliance
Avoiding common ACA reporting mistakes starts with having accurate data, consistent processes and the right technology in place. However, with changing regulations, evolving workforce dynamics and competing HR priorities, maintaining compliance can quickly become overwhelming. Even a single missed eligibility determination or reporting error can create administrative headaches and potentially expose your organization to costly penalties. That’s why many employers are turning to ACA reporting automation to simplify compliance and reduce risk. The right solution can help you:
- Manage pre-tax health care coverage deductions through payroll.
- Track employee hours of service throughout the year.
- Monitor full-time equivalent (FTE) employee counts month by month.
- Identify employees who become eligible for ACA benefits.
- Generate forms 1095-C and 1094-C for employee distribution and regulatory filing.
By automating these critical processes, employers can spend less time worrying about compliance and more time focusing on their people and business goals.
At DM Payroll Solutions, our ACA compliance reporting solution helps organizations streamline tracking, reporting and regulatory requirements with greater accuracy and confidence. When ACA compliance is supported by integrated payroll and workforce management tools, it’s easier to stay ahead of deadlines, avoid common reporting mistakes and maintain peace of mind throughout the year. To learn more about how we help simplify your ACA compliance efforts, contact our payroll team today.
