If your company has more than 50 or more full-time or full-time equivalent employees, staying compliant with the Affordable Care Act (ACA) is an important responsibility. The ACA requires employers to offer affordable health insurance. However, as coverage costs rise, it becomes harder to meet that standard, and companies that fail ACA affordability testing may face serious IRS penalties.
Why ACA Affordability Is Challenging for Employers
Businesses with 50 or more full-time or full time-equivalent employees must offer health insurance that meets ACA affordability rules. These rules limit the amount an employer can require an employee to pay for health insurance. If the cost is too high, the plan does not qualify as affordable, and the employer may be fined.
The challenge is that health insurance costs tend to rise every year. Many companies, especially growing ones, lack the buying power to negotiate lower rates on their own. This makes it difficult to control premium costs and keep employee contributions within ACA limits.
For many employers, this turns affordability testing into a constant struggle. Each year brings new rates and new challenges. Without support, keeping coverage affordable can feel overwhelming.
Understanding the Impact of Failing ACA Affordability Testing
When an employer fails affordability testing, the IRS may issue significant penalties. These can occur if an employee receives subsidized coverage through the marketplace because the company’s insurance plan was not considered affordable. Penalties can apply per employee and often add up quickly, creating financial strain and bringing additional compliance scrutiny.
Beyond the cost of penalties, failing affordability testing can create more administrative work for HR teams and increase exposure during audits tied to ACA compliance.
How an Outsourced HR and Benefits Partner Can Help Improve Affordability Outcomes
One of the most effective ways to improve ACA affordability is to reduce the overall cost of employer‑sponsored health coverage. Many organizations address this challenge by working with an outsourced HR and benefits partner that can provide access to a larger group purchasing environment and more competitive pricing from national insurance carriers. These partnerships may also expand the range of available benefits, including medical, dental, vision, and life insurance, enabling employers to offer stronger plan options while more easily meeting ACA affordability requirements.
In addition, these partners support HR teams by helping compare insurance plans, review pricing, and manage day-to-day benefits administration. This guidance can simplify decision-making and help ensure employees understand their coverage.
Extra Compliance Support That Reduces Risk
ACA rules are only one part of a company’s broader compliance responsibilities. Managing payroll, employment taxes, HR paperwork, and federal and state laws can create additional challenges for organizations of every size.
An outsourced HR and benefits solution often includes compliance specialists who help businesses stay up to date with changing laws and requirements. They use technology and structured processes that improve accuracy across payroll, benefits administration, and reporting. With better systems in place, companies can reduce mistakes and better protect themselves during ACA-related reporting or audits.
For employers with 50 or more employees, this extra layer of support can be especially valuable. Instead of trying to manage everything in-house, companies gain a resource that helps them stay organized, compliant, and prepared.
Build a Stronger ACA Strategy and Reduce Risk
Companies face ongoing pressure to keep health insurance affordable and meet ACA requirements. Rising premiums can make it difficult to stay compliant, and failing affordability testing can result in expensive IRS penalties.
Working with a trusted HR and benefits partner can help employers access competitively priced health plans, improve administrative accuracy, and support long-term ACA compliance. This can make it easier to control health insurance costs and build a more stable benefits strategy.
Looking for Smarter Ways to Manage ACA Costs and Support Your Employees?
Connect with SWBC Payroll + HR to learn how our support services can help your company improve affordability and reduce ACA compliance risk.
