An employee changes status. A coverage date is updated in benefits but not payroll. A reporting code carries forward after the circumstances supporting it have changed. 

Each detail may seem small on its own. Together, they can leave your ACA reporting telling a different story from what actually happened. 

That’s why preventing ACA penalties starts long before reporting season—with accurate employee classifications, documented coverage offers, and consistent data reviews. 

Selerix’s ACA compliance checklist reinforces that approach: track eligibility consistently, record coverage offers, and reconcile information across payroll, HR, and benefits systems throughout the year. 

For your team, that creates a practical starting point: understand what your data is saying, investigate inconsistencies, and work with your ACA team to resolve questions early. 

Here’s how to put that approach into practice. 

 Letter 226-J Is More Than a Notice. It’s a Diagnostic Tool. 

Letter 226-J notifies an applicable large employer that it may owe an Employer Shared Responsibility Payment, or ESRP. The IRS uses employer reporting on Forms 1094-C and 1095-C, along with employee tax return information, to evaluate potential liability. 

Receiving a notice can understandably raise concerns. But the letter proposes a penalty and provides an opportunity to respond. Reviewing the underlying records can help determine whether the notice reflects a reporting discrepancy, a coverage issue, or another circumstance requiring attention.  The IRS explanation of Letter 226-J outlines the process. If you’re working through a notice, our ACA penalty letter resources can help you understand your next steps. 

For customers who haven’t received a notice, these reviews are still useful. They highlight the importance of reviewing employee-level codes alongside employer-level reporting, including monthly employee counts. A form can look complete and still deserve a closer look at the information behind it. 

Four reporting risks to address before filing 

Form 1095-C codes tell a monthly story about an employee’s coverage offer, enrollment, and circumstances. A proactive review helps make sure that story matches the records behind it. 

These four areas are a useful place to start. 

Employee classifications that do not reflect ACA status 

An internal “part-time” designation does not, by itself, settle an employee’s status for ACA purposes. Hours of service and the applicable measurement method matter. 

Consider an employee hired into a variable-hour position whose hours increase. Their job title may stay the same while their ACA eligibility changes. Has the relevant measurement result been reviewed? Has any resulting eligibility change reached the team responsible for offering coverage? 

A useful review connects hours history, measurement results, eligibility decisions, and coverage offers. Looking at those records together helps identify gaps that a job-status field alone may not reveal. 

Limited non assessment periods that need another look 

Code 2D indicates an applicable limited non-assessment period. Its use should reflect the employee’s circumstances and the rules for the month being reported. 

If the same code appears month after month, review the dates and events supporting it. Does it still apply? Has an initial measurement period ended? Has the employee’s situation changed since the code was first assigned? 

A repeated code is a prompt to investigate. The question is whether it still tells the right story for that employee and that month. Any correction should follow the facts and the applicable reporting instructions. 

Affordability that is not supported by documentation 

Reporting an affordability safe harbor requires more than selecting a code. Keep the calculation and records supporting its use and confirm that the approach applies to the relevant period. 

For example, a change in employee contributions should prompt a review of the affordability calculation and any affected reporting. Keeping those records together makes it easier to explain how the reported information was determined. 

A blank Line 16 also deserves review in context. It does not automatically establish a penalty, and a safe harbor code should be entered only when supported by the circumstances and instructions. 

Dates that tell different stories across systems 

Hire dates, terminations, rehires, status changes, and coverage dates may live in different systems. Reviewing each system separately can leave discrepancies unresolved. 

Suppose a termination is recorded in payroll but has not reached benefits administration. The resulting records may show different employment and coverage histories. Your review should establish what happened and whether each system reflects it accurately. 

Some date differences are legitimate. An offer date and an enrollment effective date may differ. The task is to understand the difference and confirm that reporting reflects the correct facts—while the details are still easy to track down. 

Watch the related clip: What Red Flags We Are Seeing 

Turn report warnings into completed reviews 

Selerix audit flags and, for integrated customers, the warnings tab can help bring potential discrepancies to your attention. The next step is investigating the underlying information. 

For each flagged item, establish: 

• What triggered the warning. 

• Which records need review. 

• Whether a data or reporting correction is needed. 

• Who owns the follow-up and when it should be completed. 

Document the resolution, including cases where the reporting is correct and no change is needed. That record helps your team understand why a decision was made and gives future reviewers a clearer starting point. 

A warning that has been investigated and explained is much more useful than one that simply remains on a report. 

Helpful resource: Prepare for ACA Year-End Reporting. 

Make time for a monthly ACA coffee break 

A recurring 30-minute ACA check-in gives your team a manageable way to stay engaged between formal reviews. 

It also gives those “I need to check on that” questions a regular place on the calendar. 

Use that time to: 

• Review new hires, rehires, terminations, and status changes. 

• Check measurement results and employees approaching eligibility. 

• Reconcile recent coverage changes across systems. 

• Review flagged items and assign unresolved questions. 

• Save supporting records and follow up with your Selerix ACA team. 

Thirty minutes may surface an issue that requires more work. The value is creating a regular opportunity to find it, assign it, and keep it moving before filing deadlines add pressure. 

Selerix’s ACA compliance checklist can help your team connect those monthly check-ins with broader preparation for filing. 

What ongoing review looks like in practice 

In Selerix’s AE2S customer case study, the engineering firm’s ACA process includes quarterly data reviews coordinated by the Selerix ACA team. Those reviews give AE2S opportunities to assess its data before filing season, supported by benefits and ACA information managed in a single platform. 

It’s a concrete example of how regular reviews and connected information can become part of the routine, giving teams time to work through questions throughout the year. 

Keep the records behind the codes 

Organized documentation makes routine reviews easier and helps your team explain reporting decisions later. 

Keep coverage offers, enrollment or waiver records, hours history, measurement results, affordability calculations, and relevant employee changes accessible. Preserve filed forms and filing confirmations as well. 

As you review an employee’s record, ask: Could someone understand the reported codes from the documentation we have retained? 

That question can reveal where a calculation, explanation, or supporting record needs to be added. A little clarity now can save your team from piecing together the same information months later. 

If the answer is unclear, bring the question to your ACA Client Success Manager or support team. 

If a notice arrives act promptly 

Read the entire letter and its attachments, record the response deadline, and contact your Selerix ACA team promptly. Gather the filing records and supporting documentation for the year identified in the notice. 

Follow the letter’s response instructions. If you anticipate needing additional time, contact the IRS using the information provided in the notice and request an extension right away. Asking early gives your team more opportunity to gather records and prepare a complete response. Confirm whether the extension is granted and keep copies of your response and supporting materials. 

For additional assistance, explore Selerix’s ACA Penalty Reduction Services, which support notice review, reporting analysis, and response preparation. 

Put your Selerix ACA resources to work 

You don’t need to wait for filing season to raise a coding question or investigate an employee change. Regular reviews give your team and Selerix more time to understand the facts and address discrepancies. 

At Selerix, we believe ACA compliance works best when accurate data, connected systems, and experienced people come together throughout the year. When those pieces work together, HR teams can spend less time untangling reporting questions and more time staying ahead of changes that affect their workforce. 

Keep learning about ACA 

Whether you’re reviewing a flagged item or building a more consistent review routine, a useful resource can make the next step clearer. 

Visit our website for reporting guides, tutorials, and troubleshooting resources, or explore our on-demand webinars for practical discussions of ACA questions and common reporting challenges. 

And when a question needs a closer look, contact your ACA Client Success Manager or support team. We’re here to help you work through it. 

 Disclaimer: Selerix does not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this post is intended to provide a general overview of the topics and services contained herein. Selerix makes no representation or warranty as to the accuracy or completeness of the post and undertakes no obligation to update or revise the post based upon new information or future changes.