ACA Changes Coming in 2026: How to Prepare

Your team is scaling fast, maybe you’ve got talent scattered across continents, and suddenly the IRS drops a letter about changes to the Affordable Care Act (ACA). Your first thought? “What does this mean for my people?”

The basics are simple, at least on paper. The ACA requires large employers (those with 50 or more full-time equivalent employees) to offer qualifying health coverage to their workforce or face penalties. It sounds straightforward until you dig into the definition of “qualifying coverage.” It has specific affordability thresholds, reporting requirements, and compliance deadlines that can make even seasoned HR professionals break into a cold sweat.

And here’s the twist: the IRS announced significant updates to ACA compliance requirements taking effect in 2026. How you calculate affordability, how coverage is defined, and even how penalties are triggered. And if you wait until the last minute—in 2026—it won’t just be a scramble; it’ll be chaos.

The stakes are real. We’re talking about potential penalties that can reach thousands of dollars per employee, not to mention the operational chaos of last-minute compliance efforts. Companies that start preparing now can turn this challenge into a competitive advantage. They’ll have streamlined processes, happier employees, and the confidence that comes with being ahead of the curve.

Overview of the ACA employer mandate

The ACA employer mandate kicks in once you hit 50 full-time equivalent employees. At that point, you’re officially an “Applicable Large Employer,” which sounds impressive but comes with serious responsibilities.

Think of it as a three-part requirement that affects how you operate.

• Coverage requirement. Offer affordable, minimum essential coverage to at least 95% of your full-time employees and their dependents.
• Affordability test. Ensure the employee’s share of premiums doesn’t exceed specific income-based thresholds.
• Reporting obligation. File annual Forms 1094-C and 1095-C with the IRS to prove compliance.

The math gets tricky because “affordable” has a precise definition. The coverage you offer must cost the employee no more than a certain percentage of their household income. Miss this target, and you could face penalties for each affected employee. The reporting piece involves tracking the coverage status of every full-time employee throughout the year and documenting it for the IRS.

The number of full-time employees is critical to determining whether penalties should apply and the calculation of any such penalties. “The IRS has approved the use of two different determination methods: the Monthly Measurement Method (MMM) and the Look-Back Measurement Method (LBMM). Each method considers an employee’s ‘hours of service’ for any given month,” advises Claire Martin, an experienced employment attorney.

“For this purpose, ‘hours of service’ includes any hour for which an employee is either paid or eligible to be paid for performing duties for the employer, or when no duties are performed because of vacation, holiday, illness, disability, or other similar leave of absence,” Martin adds.

What’s changing with the ACA in 2026?

The IRS rarely makes sweeping changes to ACA compliance, but when they do, it usually means they’ve spotted gaps in the current system. The 2026 updates touch nearly every aspect of how employers manage their ACA obligations.

Here’s what’s shifting under your feet.

• Affordability thresholds. The percentage of income that employees can be required to pay for coverage is getting recalibrated. This directly affects whether your health plan passes the affordability test and determines your penalty exposure.
• Penalty calculations. Non-compliance penalties are being adjusted, both in terms of amounts and how they’re calculated. Companies that fail to offer coverage or provide unaffordable plans will face updated financial consequences that reflect current economic conditions.
• Reporting overhaul. The IRS is tightening reporting requirements and expanding electronic filing mandates. Paper forms are becoming extinct for larger employers, and the information you’ll need to track and submit is getting more detailed.
• Employee classification updates. Potential changes to how full-time employee status is determined and modifications to look-back measurement periods could reshape how you calculate your workforce obligations. This affects which employees you’re required to cover.
• Statement deadlines. The timeline for providing coverage statements to employees is being revised. Missing these deadlines can trigger penalties even if your coverage itself is compliant.

These changes don’t exist in isolation. They’re designed to work together, creating a more comprehensive compliance framework that leaves less room for interpretation and fewer opportunities for accidental non-compliance.

How these ACA changes impact employers

The 2026 updates aren’t just regulatory tweaks. They’re going to reshape how you think about benefits, budgeting, and the systems that keep your HR operations running smoothly.

Here’s where you’ll feel the impact:

• More employees to cover. Expanded eligibility rules could pull additional workers into your coverage requirements, increasing both your administrative burden and benefits costs.
• Plan redesign pressure. Lower affordability thresholds might force you to restructure your health plans or increase employer contributions to keep premiums within acceptable limits for employees.
• Penalty escalation. Higher non-compliance penalties mean the cost of getting this wrong just went up significantly, making perfect compliance less optional and more survival-critical.
• System upgrade requirements. Stricter reporting deadlines and electronic filing mandates will require you to upgrade your HR systems and processes, potentially involving new software or additional staff time.
• Cash flow considerations. Between potentially higher employer contributions and system upgrade costs, these changes could impact your benefits budget and require earlier financial planning.

The ripple effects extend beyond HR. Your finance team needs to model new costs. Your IT department might need to implement new tracking systems. Even your leadership team will need to understand how these changes affect your ability to attract and retain talent in competitive markets.

Steps to take now

The good news about the ACA changes slated for 2026 is that you have time to get this right. The challenge is that time has a way of disappearing when you’re focused on growth, hiring, and the hundred other priorities competing for your attention. The companies that start now will have the luxury of thoughtful planning instead of frantic scrambling.

Step 1: Audit current ACA compliance

Start with what you know. Pull together your employee count, classification methods, and current employee benefits structure to see where you stand today. This isn’t just about checking boxes—it’s about understanding your baseline so you can measure the impact of upcoming changes.

Review how you determine full-time employee status and whether your current benefits meet affordability standards. Many companies discover gaps they didn’t know existed, like seasonal workers who should be classified differently or premium structures that push certain employees above affordability thresholds.

Step 2: Update benefits strategy

This is where the rubber meets the road. Model how the new affordability thresholds will affect your current plans and what adjustments you’ll need to make. Some employers find they need to increase their contribution rates, while others discover they can restructure their plans to maintain the same cost structure.

Work closely with your benefits broker or consultant to ensure your plans will meet the new requirements. They should be running scenarios now to help you understand your options before renewal season arrives. The key is having multiple strategies ready instead of being locked into one approach.

Step 3: Review payroll and HR systems

Your systems need to capture more data than ever before, and they need to do it accurately. Check whether your current HR and payroll software can handle the enhanced reporting requirements and whether they integrate properly with your benefits administration.

This might mean upgrading software, changing vendors, or simply configuring your existing systems differently. The goal is to ensure clean, reliable data flows from hiring and benefits enrollment to annual reporting, all without manual intervention wherever possible.

Step 4: Train HR and payroll teams

Knowledge gaps create compliance risks. Your team needs to understand not just what changed, but why it changed and how to implement the new requirements consistently. This includes everyone from the people processing new hires to the managers approving benefits elections.

Assign specific ownership for ACA compliance monitoring. Someone needs to be watching for changes in employee status, tracking coverage elections, and ensuring reporting deadlines don’t sneak up on you. Make it part of someone’s job description, not an extra responsibility that gets forgotten during busy periods.

Step 5: Plan for early reporting readiness

Deadlines wait for no one, and the new reporting timeline is more aggressive than what you’re used to. Update your internal calendars now to account for earlier submission requirements and build in buffer time for testing and corrections.

Test your electronic filing systems well before the 2026 reporting cycle begins. Run practice submissions, verify data accuracy, and make sure your team knows how to troubleshoot common filing issues. The IRS systems get overwhelmed near deadlines, so early preparation gives you more options if something goes wrong.

Risks of non-compliance

Getting ACA compliance wrong in 2026 carries a different weight than it did when the mandate first rolled out. The IRS has refined its enforcement mechanisms, penalties have been adjusted for economic reality, and the administrative systems are more sophisticated at catching errors. The cost of non-compliance now extends far beyond just financial penalties.

• Updated penalty structure. The 2026 penalty amounts reflect current wage levels and can reach several thousand dollars per full-time employee annually. Companies that offer coverage but fail affordability tests face separate penalties for each affected employee who receives marketplace premium tax credits.
• Enhanced IRS enforcement. The IRS can now cross-reference employer reporting with employee tax returns and marketplace data faster and more accurately. This means penalties that might have been overlooked previously are now being caught and assessed systematically.
• Employee relations damage. Non-compliance creates trust issues with your workforce and affects retention, morale, and your ability to attract top talent. Employees who discover coverage gaps or face higher costs due to compliance failures often feel betrayed by their employer.
• Competitive disadvantage. In a tight labor market, benefits compliance has become a differentiator. Companies known for benefits issues struggle to recruit quality candidates, and reputational damage can extend beyond HR into customer and investor relationships.

Lighten the administrative burden of ACA changes

Here’s something you learn fast when you’re growing a global team: benefits get complicated. Really complicated. And ACA compliance? It’s just one piece of a much larger benefits puzzle, especially if you’re hiring talent across multiple countries.

Pebl’s Global Employee Benefits capability handles all the complexity—compliance, administration, reporting—and we do it across more than 185 countries. So when changes like the 2026 ACA updates roll out, your team doesn’t have to become overnight experts in regulatory requirements. Instead of spending your time decoding IRS notices and updating systems, you can focus on what you do best—building great teams and growing your business. Our part? Well, we handle the compliance headaches that keep other employers up at night.

Interested in learning more? Get in touch today.

This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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