Nobody wakes up one day and decides to fail an ACA audit. It happens the same way a car breaks down on the highway: not all at once, but one small warning at a time. A spreadsheet that “someone will clean up eventually.” A measurement period that hasn’t been double-checked since it was set up. A filing that went through fine last year, so surely, it’ll go through fine again. 

Then one day an envelope shows up. It says IRS Letter 226-J on it. And now it’s not a maintenance item — it’s a penalty, with your company’s name on it. 

The good news: almost every ACA compliance failure we see wasn’t a mystery. It was a warning light that had been quietly blinking for months, sometimes years, before anyone paid attention to it. So before we talk about fixing anything, let’s talk about where to look. 

Red Flag #1: “We’re Pretty Sure We’d Catch It”

Eligibility tracking is the part of ACA compliance that seems the most obvious — until you watch how it happens at most companies. An employee crosses into full-time hours. A seasonal hire keeps getting rehired every summer. A part-timer starts picking up more shifts to cover someone’s leave. 

If the honest answer to “how do we catch that?” is “someone would probably notice,” that’s your check engine light. Manual eligibility reviews and “we’ll catch it in the spreadsheet” are the compliance equivalent of driving without a fuel gauge — you’re not wrong every time, but you only have to be wrong once during the wrong measurement period.

Red Flag #2: Nobody Can Say Which Measurement Method You Use — With a Straight Face

Monthly measurement or look-back? Standard or transition rules? If that question gets a pause instead of an answer, you’ve found gap number two. 

Measurement periods are supposed to be the steady, backbone of ACA compliance — the part that runs quietly in the background while everyone worries about open enrollment instead. But “boring and reliable” only holds up if somebody actually owns it. When measurement periods live in the gap between HR, payroll, and finance — reviewed by whoever remembers to look — status changes and stability periods start slipping through unnoticed. Not because anyone made a mistake. Because nobody was actually assigned to catch it. 

Red Flag #3: Your Forms 1094-C and 1095-C Come From a Spreadsheet Family Tree

Ask where your reporting data actually comes from, and if the honest answer involves the phrase “a few different spreadsheets that get combined,” pump the brakes. Every hand-off between systems — payroll to HR to a filing spreadsheet to the IRS portal — is a place where a code can quietly go wrong. Line 14 gets the wrong offer code. Line 16 doesn’t match what happened that month. None of it looks wrong. All of it can trigger a mismatch letter. 

Rejected AIR transmissions and after-the-fact corrections aren’t just annoying — they’re data. If you’ve had either, that’s not bad luck. That’s your process telling you something, loudly, and it’s worth listening before next filing season instead of after.

Red Flag #4: If a Penalty Letter Showed Up Tomorrow, Who Opens It?

This is the one that separates “mildly disorganized” from “actually exposed.” You can have decent eligibility tracking and clean filings and still get burned here, because IRS correspondence has a clock attached to it. Letter 226-J comes with a response deadline — not a suggestion, a deadline — and if the honest answer to “who owns this” is a shrug, you’re already behind before you’ve even opened the envelope.

The same goes for documentation. If someone asked for your affordability calculations or offer-of-coverage records from three years ago, could you find them in an afternoon? Or would it turn into an archaeology project through old drives and departed employees’ inboxes? Retention and retrieval don’t matter at all — right up until the one day they matter enormously.

So… How Many of These Sound Familiar?

Here’s the thing about warning lights: they’re easy to ignore. The measurement period gets figured out eventually. The spreadsheet gets reconciled. The letter never comes. Right up until it does. 

We built a short, genuinely useful self-check that walks through exactly these four areas — eligibility tracking, measurement periods, reporting accuracy, and IRS readiness — and gives you a personalized readiness score at the end, along with the specific spots worth a closer look. It takes about five minutes, nobody’s watching over your shoulder, and you’ll walk away with a clearer picture than you started with either way. 

What To Do With Your Results

If you scored clean: good. Keep doing what you’re doing, and make this a once-a-year habit rather than a one-time gut check. Processes drift, even good ones. 

If a few areas lit up: that’s normal, and it’s exactly what this tool is for. Most of the risk we see isn’t dramatic — it’s a handful of small, fixable gaps that compound quietly over a few filing cycles.  

If it looked more like a dashboard full of warning lights than a couple of blinking ones: it’s worth an actual conversation before your next filing deadline, not after. The fixes get cheaper and less stressful the earlier you make them. 

We can help!

Either way, you now know more than you did five minutes ago.