Employers often turn to Affordable Care Act (ACA) compliance solutions offered by their Payroll or HRIS platforms, believing they have everything covered. However, many of these solutions fall into a category known as "ACA Light”, a term for compliance tools that lack the depth and logic necessary to handle complex employer situations and IRS regulations. Unfortunately, many Applicable Large Employers (ALEs) only discover the limitations of these solutions when they receive a 226J penalty from the IRS. By then, it’s often too late, and the financial repercussions can be severe. 

What Is ACA Light? 

ACA Light refers to solutions that provide minimal compliance functionality, often leaving employers vulnerable to costly mistakes. These platforms may offer basic tracking or data input capabilities but fail to provide critical support, such as: 

• Automatic population of IRS-mandated codes on 1095-C forms. 
• Accurate tracking of measurement periods. 
• Selection of the correct IRS calculation method for determining employee eligibility. 

Without these crucial features, employers may unknowingly fall out of compliance, leading to costly penalties and time-consuming corrections. 

The Hidden Risks of Free or Light ACA Solutions 

Many employers opt for ACA solutions that come "free" with their payroll or HR systems, assuming they provide full compliance support. However, these tools often leave employers with major compliance gaps. For example: 

• Incomplete IRS Form Coding: Many solutions do not apply the appropriate Line 14 and Line 16 codes on Form 1095-C, leaving it up to the employer to manually determine the correct codes. An incorrect code can tell the IRS the wrong story—leading to expensive penalties. 
• Lack of Employee Tracking Capabilities: Some ACA solutions do not track employee hours or determine full-time status, placing the burden on the employer to track this data manually or invest in a separate tracking solution. 
• No Audit-Ready Reporting: If an employer receives an IRS penalty letter, they must provide detailed, accurate data to dispute the claim. Many ACA Light solutions do not maintain historical data in an auditable format, making it difficult to respond effectively. 

The worst-case scenario? Employers believe they are in compliance—until they receive an IRS penalty letter and realize their ACA Light solution has failed them. 

Choosing the Right ACA Solution: Key Questions to Ask 

To ensure your business is fully protected and compliant, ask your ACA solution provider these critical questions: 

1. Does the solution manage the complexities of IRS forms? 

 A robust ACA solution should use payroll and benefits data to automatically apply the appropriate codes to 1095-C forms. 

  2. Does the solution assist with ongoing employee tracking? 

ACA compliance is a year-round effort. The right solution should track employee hours, determine full-time status, and check affordability safe harbors to ensure compliance. 

  3. Does the solution generate fully auditable forms? 

Your ACA provider should store all supporting data used for IRS filings, ensuring you have the necessary documentation in case of an audit or penalty notice. 

Does Your Vendor Check all the Boxes?

Download our helpful vendor check list to see if your vendor checks all the boxes.

When it comes to ACA compliance, cutting corners with an ACA Light solution is not worth the risk. Employers must ensure they have a system that provides comprehensive tracking, automatic form population, and audit-ready reporting. Before committing to a solution, ask the right questions and choose a provider with true ACA expertise. 

SyncStream Solutions offers a robust ACA compliance platform designed to keep your business protected and reduces the risk of penalties.  With expert-backed technology and comprehensive compliance tracking, SyncStream Solutions ensures that your ACA reporting is accurate, efficient, and audit-ready. Don’t let an inadequate solution put your business at risk—trust SyncStream Solutions for your ACA compliance needs.