That Term May Not Mean What You Think It Means

To paraphrase the memorable words of Inigo Montoya in The Princess Bride, “You keep using that healthcare term. I do not think it means what you think it means.” As inconceivable as it might seem, a lot of very common terms we use all the time in HR and workforce management don’t always mean the same thing in ACA terms.

Here are a couple of big ones:

1.     Full-Time

“The job is yours! Can you start full time, next week?”

Before the ACA, “full-time” could mean whatever your handbook said it meant. Very often this was a 40 hour work week, but you could define it as 37.5, or even 32 hours. But since 2015, the IRS has said otherwise: anyone averaging 30 hours per week or 130 hours per month is now considered full-time under the ACA.

That redefinition also comes with a responsibility: employers must track hours accurately for all employees. Miss that, and you could be misclassifying workers, under-report offers of coverage, and open yourself up to fines.

2.     Full Benefits

“I got the job — and it comes with full benefits!”

To most employees, full benefits sound like a big win. But in the world of ACA compliance, not all “benefits” are created equal.

Unfortunately, not everyone has the same understanding of what “full” healthcare coverage merans.  To the IRS, the qualifying health coverage that an employer needs to provide to avoid penalties is a Minimum Essential Coverage plan (see below).  Moreover, to fully avoiud penalties, the plan must also provide "minimun value". Plans that provide minimum value inlcude major medical plans and individual coverage health reimbursement arrangements (ICHRAs).

Here’s where many employers get tripped up: dental, vision, and other ancillary coverage don’t count toward ACA compliance. They’re great additions for attracting and keeping employees. but they don’t satisfy the legal definition of a “full” health plan.

ACA-compliant health plans must offer:

1.     Minimum Essential Coverage (MEC):  Abiding by the ACA requirements,a MEC policy must cover, at minimum, the ACA-recommended preventive care services.

2.     Minimum Value (MV):  The plan must also cover at least 60% of total allowed medical expenses.
 
 

3.     Affordability: The plan must meet IRS affordability standards based on income and plan cost. Not all coverage that feels affordable meets the ACA’s definition of affordability. Some plans pass the cost onto employees in ways that aren’t obvious until it’s too late — leaving workers with surprise bills and employers exposed to compliance risk.
 
To meet the ACA’s affordability requirement, the employee’s share of the premium for self-only coverage — not family coverage — must fall below a set percentage of their income (this changes year to year).

The IRS provides three safe harbors for calculating this number, but the key is this: If the plan doesn’t meet the affordability threshold, and an employee gets subsidized coverage through the Marketplace, the employer can face penalties.

That’s why it’s critical to go beyond the sticker price and understand how your plans stack up against ACA rules. If employees can’t afford the coverage you’re offering — by the IRS’s definition — you’re at risk of triggering a 226-J letter.

Unless your health plan meets these three ACA thresholds, it may not protect you from penalties — or provide employees the coverage they think they’re getting.  Employers who don’t know the difference risk non-compliance and employee dissatisfaction — two problems no one wants at open enrollment or tax season.   

ACA Terms Born from the Law (and Why They Matter)

The ACA didn’t just change the definitions of familiar terms it introduced a whole new set of acronyms and compliance checkpoints that employers must now navigate. These next few are especially critical to understand if you want to avoid costly errors.

1.     226-J Letter

This is the letter no employer wants to see.

A 226-J notice is how the IRS tells you there’s been a problem with your ACA reporting — or that one of your employees received subsidized coverage through the Marketplace, triggering a potential penalty for your organization. These letters outline the penalty amount and give you a short window to respond. And they’re not rare — more and more employers receive them each year, especially as ACA enforcement ramps up.
 
If you're not confident in your ACA filings or reporting accuracy, now’s the time to get proactive—because once the 226-J arrives, you’re already in damage control mode.
 
 

2.     Employer Mandate

The Employer Mandate is the core of ACA compliance. It’s the set of requirements that large employers must meet to avoid penalties. These including.

• Tracking employee hours to determine full-time status
   
  
• Calculations for affordability of plans , and offering coverage that meets minimum essential coverage, minimum value, and affordability standards
   
  
• Monthly updates of codes and employee contribution of benefits to populate the 1095-C and 1094-C forms. 

• Completing and distributing a 1095-C for each employee by the deadlines mandated (typically March 2^nd)

• Filing an employer’s 1094-C electronically with the IRS by March 31

Miss any of these steps, and you’re vulnerable to penalties — even if your intentions were good.

3.     Applicable Large Employer (ALE)

This is the threshold that determines whether you’re subject to the Employer Mandate. An Applicable Large Employer is any business that employs 50 or more full-time equivalent (FTE) employees, on average, during the previous calendar year. This includes not only full-time staff but part-time employees whose combined hours equate to additional FTEs.
 
Think you’re under the limit? Make sure you’re running the numbers correctly  many small-to-midsize businesses mistakenly assume they’re exempt when they’re not.
 
 

4.     Breaks in Service

  This one catches a lot of employers off guard. Under ACA rules, if an employee leaves and comes back within 13 weeks, they must be treated as a continuing employee for benefits purposes — not a brand-new hire. That means you can’t reset their eligibility clock.
 
This rule was designed to prevent employers from gaming the system by cycling employees on and off the books to avoid offering benefits. If you rehire workers often — especially in industries like retail, seasonal, or healthcare — understanding this rule is essential.
 
 

5.     The Marketplace

  Often called the Exchange, the Marketplace is where individuals can shop for health insurance that meets ACA standards — especially if their employer doesn’t offer compliant coverage.
 
But here’s the catch: If one of your full-time employees buys coverage on the Marketplace and qualifies for a subsidy, that triggers a potential penalty for you—unless you offered them affordable, ACA-compliant coverage and they declined it. That’s why accurate tracking, eligibility management, and documentation are so important. The Marketplace is a safety net for employees — but it’s also a compliance tripwire for employers who don’t have their house in order. Be sure your company isn’t one who trips over it.