IRS Enforcement of ACA Compliance Intensifies for Large Employers in 2024

Below is a polished, conversational‐tone article suited for an insurance industry audience. I’ve added context, varied perspectives, and pulled quotes; I preserved only one bullet list section as requested.

ACA Compliance: A Renewed Focus for Employers — and Insurers

The Internal Revenue Service has not let up on Affordable Care Act enforcement, even as it navigates staffing shifts. For applicable large employers (ALEs)—those averaging more than 50 full-time equivalent (FTE) employees—the stakes remain high. They must offer minimum essential coverage and accurately file IRS Forms 1094-C and 1095-C. Slip up, and penalties can be steep.

In 2024, the per-employee penalty reached $2,970 for employers failing to meet the offer requirement. Beyond that, ALEs may be penalized if employees secure coverage via exchanges—even when the employer complied with the “95 percent offering” rule. Penalties for late or missing filings, or failure to furnish forms, compound the exposure. And because these penalties are treated as tax liabilities, the IRS can pursue collection aggressively, via levies or liens, though employers do retain due process rights to contest.

But recent legislative changes are reshaping the terrain—and creating both relief and new challenges.

What Has Changed (and What Remains)

The Employer Reporting Improvement Act: A Game Changer

In late 2024, Congress passed the Employer Reporting Improvement Act (ERIA), which codified several crucial protections for employers. Notably:

• The response window for the IRS’s Letter 226-J (which proposes an ACA penalty) has expanded from 30 days to 90 days. (Liebert Cassidy Whitmore)

• A six-year statute of limitations now applies for assessing employer-shared responsibility penalties, effective for filings due after December 31, 2024. (Liebert Cassidy Whitmore)

• The law also formalizes relaxed rules for how Form 1095-C may be furnished to employees. Prior consent protocols are loosened, making electronic distribution easier. (Venable)

It’s worth noting that for reporting years before 2025, the statute of limitations remains ambiguous. That uncertainty raises the potential for litigation over whether ACA forms constitute tax returns. (chamberlainlaw.com)

What Enforcement Still Looks Like

Despite these reforms, the IRS continues to enforce stringently:

• Dual penalties may be assessed (for both late or non-filing and failure to furnish) when the IRS deems both lapses occurred.

• The IRS often sends minimal notice, giving employers tight deadlines to mount a response.

• Critically, the penalties remain collectible through standard tax mechanisms—making prompt engagement essential.

As one compliance expert put it:

“Proper documentation and swift response to IRS contact remain critical to managing compliance exposure under evolving ACA enforcement guidelines.”

Practical Steps for ALEs (and Insurers Advising Them)

Here’s a practical checklist insurance professionals can share with ALE clients to manage their compliance risk:

• Maintain long-term, detailed records of all coverage offers, affordability analyses, and filings — ideally indefinitely, to cover possible audit lookback periods.

• Keep audit trails showing how each 1095-C and 1094-C was calculated and filed, including any corrections or amendments.

• If a 226-J or other IRS notice arrives, respond cooperatively and within the 90-day window, seeking extension if needed.

• Engage seasoned tax or ACA compliance advisors early to interrogate proposed assessments, negotiate adjustments, or file appeals.

Even with reforms in place, the burden of proof and administrative complexity continue to favor the IRS—so proactive risk management is essential.

Pull Quotes Worth Emphasizing

“Employers now have six years—not an indefinite window—for potential ACA penalty assessments.” — ACA compliance consultant

“The IRS’s tight notification windows and minimal disclosure practices make it especially important to preserve records and respond quickly.” — Tax attorney specializing in employer mandates

Final Thoughts

The ACA’s employer mandate remains a tulmultuous field. On one hand, ALEs now enjoy greater clarity and protection through statutes of limitation and longer response periods. On the other hand, the IRS’s determination to enforce remains undiminished, and past years remain subject to ambiguous review.

For insurance professionals advising ALEs, the message is clear: don’t relax compliance efforts. Encourage your clients to preserve full documentation, build audit-ready systems now, and engage expertise early when controversies arise. The reforms give an employer more breathing room—but they don’t let you skip the work.