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If your business is an Applicable Large Employer (ALE), it’s time to prepare for updated Affordable Care Act (ACA) reporting rules for 2026. The IRS has released new penalty structures and clarified some of the reporting processes tied to Form 1095-C, and failing to stay compliant could cost you thousands per employee.
This guide provides everything you need to know about 1095-C updates, new fines, and the steps to take before Q1 2026.
Employers classified as ALEs (those with 50 or more full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) that is affordable and provides minimum value. They must also report this coverage annually using:
These forms help the IRS determine:
The IRS has raised the penalties for failure to file or furnish 1095-C forms:
For a 200-employee company, this could mean:
$310 x 200 = $62,000 in potential penalties
And that’s just for one year of missing reports or furnishing late.
Important: If you have 10 or more forms, you must file electronically.
The IRS upgraded its Affordable Care Act Information Returns (AIR) system to improve validation, but it now:
If your vendor hasn’t updated their integration, rejections will increase.
New IRS guidance clarifies how to report conditional spousal offers and COBRA offers.
This is a major source of errors and potential fines.
A California tech firm with 125 employees used a payroll vendor that failed to file 1095-Cs for two years. They assumed the vendor was handling it.
Result:
Taylor Benefits now assists their HR and compliance teams to verify ACA submissions annually and cross-check IRS acknowledgments.
Track your full-time equivalents every month to avoid last-minute surprises.
Make sure your group health plans meet the 2026 affordability threshold. For 2026, the employee contribution can’t exceed 8.39% of their household income (or safe harbor proxy).
1095-C Line 14 and 16 codes are not intuitive. Ensure you:
Ask your ACA filing vendor:
IRS audits can go back several years. Keep:
Most 1095-C mistakes happen because employers treat ACA reporting as a year-end task. By then, it’s too late to fix offer issues or affordability gaps.
At Taylor Benefits, we offer ACA compliance audits, employee affordability calculators, and 1095-C filing support. If you’re unsure whether your current broker or vendor is doing this right, schedule a call.
Let’s make 2026 your most accurate and penalty-free ACA reporting year yet.
The employer is ultimately responsible. Even if a vendor prepares or files the 1094-C and 1095-C forms, the IRS holds the employer accountable for accuracy and compliance. You should review all reports before submission, confirm that employee data and coverage codes are correct, and keep records of your review.
The IRS may impose fines for inaccurate or missing filings, with penalties increasing based on the number of employees affected. Staying accurate with reporting minimizes financial risk.
Most employers keep ACA reporting records for at least three to four years after the filing date. Maintaining these records for several years provides protection if the IRS reviews a company’s compliance or if employees question the information reported on their forms. These records should include payroll data, employee eligibility calculations, copies of filed forms, and health plan enrollment details. Organized documentation makes it easier to respond to any requests for verification.
Common mistakes include incorrect coverage codes, missing employee data, and mismatched payroll records. Many employers also misclassify affordability or forget to update monthly eligibility details. These errors can lead to IRS rejection or penalties, even if the coverage itself is compliant.
Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.
We just started working with Taylor Benefits and could not be happier. Todd gave us quite the education as well as some time saving tools to help us manage our HR and save money too. We are looking forward to a long relationship!”
-Carol, Accounting Manager, recruitment marketing company, Campbell, CA
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