ACA compliance may feel routine more than a decade in—but for employers and brokers, the risks have never been higher. With IRS enforcement increasingly automated, even small reporting errors can snowball into six- or seven-figure penalty letters.
In this episode of Regulatory Joe, Joe Boyle sits down with Jordan O. Smith, Practice Leader at Lumelight, to break down the most common ACA reporting mistakes, the risks of relying on disconnected systems, and the proactive steps employers and their advisors should take to stay compliant.
Why ACA Compliance Still Puts Employers at Risk
Many employers assume shrinking federal staff means fewer audits. But as Jordan pointed out, the IRS doesn’t need more people—it built automated systems that continuously compare and flag inconsistencies between W-2 data, ACA filings and subsidy records.
The automated nature of this process is what makes enforcement so aggressive. Instead of relying on manual audits, the IRS can now issue penalty notices at scale, faster and more consistently than a team of humans could.
For employers, that means enforcement is both broader and less forgiving—any mismatch in reporting is likely to be caught, and penalties are triggered purely by accuracy, not intent.
Where ACA Reporting Goes Wrong for Employers & Brokers
Employers and brokers often fall into the same compliance pitfalls year after year:
- Variable-hour tracking: Misclassifying eligibility when employees cross the full-time threshold
- System blind spots: Payroll knows contributions, ben-admin knows enrollments—neither alone captures the lowest-cost employee-only option.
- Rapid growth or funding changes: Fast headcount increases or shifts from being fully insured to self-insured can suddenly trigger new ACA reporting obligations.
- Documentation gaps: Employers who can’t produce proof of past filings or affordability certifications are at higher risk.
These weaknesses create inaccurate filings that trigger automated enforcement.
Broker Strategies to Prevent Employer ACA Penalties
For brokers and advisors, ACA compliance isn’t just about benefits—it’s about protecting clients from regulatory exposure. Jordan highlights several red flags brokers should be watching for:
- Clients who can’t show prior ACA reporting records
- Employers running non-integrated payroll and ben-admin systems
- Frequent status changes between full-time and part-time employees
- IRS letters that were missed or filed away without response
“We know that a surprised broker is often a former broker,” Jordan notes. By asking tough questions early and keeping visibility into compliance, advisors can protect client relationships and build long-term trust.
ACA Compliance Checklist for Employers & Brokers
Employers and their advisors can reduce exposure by focusing on these key actions:
- Validate systems: Reconcile data across payroll and benefits platforms to ensure accuracy.
- Track eligibility year-round: Monitor variable-hour employees continuously, not just during open enrollment.
- Respond promptly to IRS notices: Engage immediately with 5699 or 226J letters and correct filings without delay.
- Make compliance strategic: Treat ACA reporting as an ongoing business priority, not just a seasonal task.
- Leverage advanced support: For employers with heightened risk or public visibility, Lumelight One provides concierge-level compliance backed by legal oversight and financial guarantees for added peace of mind.
When approached proactively, ACA compliance becomes manageable, protecting organizations from financial risk and keeping brokers firmly aligned with their clients’ long-term success.
Watch the full episode of Regulatory Joe for Jordan O. Smith’s insights on strengthening ACA reporting, navigating automated enforcement, and building compliance confidence across employers and brokers.
