ACA Reporting

March is one of the more critical compliance months of the year for ACA reporting, as it includes both the employee-facing and IRS filing deadlines.

For 2025 calendar year reporting (filed in 2026), employers are required to meet two key deadlines. By March 2, 2026, employers must furnish Forms 1095-C or 1095-B to employees and covered individuals, or alternatively, post a clear and accessible notice that these forms are available upon request. By March 31, 2026, employers must electronically file their ACA returns with the IRS.

These requirements apply to Applicable Large Employers (ALEs), those with 50 or more full-time employees, as well as smaller employers that sponsor self-insured or level-funded plans. Reporting responsibilities vary depending on plan structure. For example, ALEs with fully insured plans are responsible for Forms 1094-C and 1095-C, while carriers handle 1095-B reporting. However, ALEs with self-insured plans must report both the offer of coverage and enrollment details. Smaller employers with fully insured plans are generally not responsible for ACA reporting, while those with self-insured arrangements must file Forms 1094-B and 1095-B.

One notable administrative change is the continued availability of the alternative method for furnishing forms, which allows employers to post a website notice instead of mailing forms to all employees, provided requests are fulfilled within the required timeframes, and the notice remains available through October 15.

From a risk perspective, penalties for noncompliance can add up quickly, ranging from $60 to $340 per return, and up to $680 per return for intentional disregard, with separate penalties applying for failure to furnish a statement and failure to file with the IRS. In addition, ALEs remain subject to employer shared responsibility penalties if coverage was not offered appropriately or reported accurately.

FMLA Tax Credit 

The Paid Family and Medical Leave (PFML) employer tax credit remains a valuable, but often underutilized opportunity for employers offering paid leave benefits.

This credit allows eligible employers to claim a general business tax credit equal to 12.5% to 25% of wages paid to employees during qualifying family or medical leave. The credit applies to up to 12 weeks of leave per employee per year, and the percentage increases incrementally as wage replacement exceeds 50% of normal wages.

To qualify, employers must meet several specific requirements. A written policy must be in place that provides at least two weeks of paid leave for full-time employees (with a proportional benefit for part-time employees), ensures employees receive at least 50% of their normal wages, and includes protections against retaliation. The credit is also limited to qualifying employees, generally those who meet certain tenure and compensation thresholds.

Qualifying leave categories generally mirror those under the Family and Medical Leave Act (FMLA), including leave for the birth or adoption of a child, an employee’s serious health condition, caring for a family member with a serious health condition, and certain military-related leave situations.

From an administrative standpoint, employers claim the credit through their federal tax filings using IRS Form 8994, with the credit ultimately reported as part of the general business credit on Form 3800. Employers must also reduce their wage deduction by the amount of the credit claimed.

A key consideration is the interaction with state-mandated paid leave programs. While state-required leave can count toward meeting the minimum requirements, wages that are required by state law generally cannot be used to calculate the federal credit, meaning only employer-provided benefits above state mandates may qualify.

For employers already offering paid leave, or considering enhancements, this credit can help offset costs while also supporting broader workforce strategies, including recruitment, retention, and employee well-being.

Department of Labor Enforcement Priorities

The Department of Labor (DOL), through its Employee Benefits Security Administration (EBSA), has announced updated enforcement priorities for 2026, providing a clear signal of where regulatory scrutiny will be focused.

EBSA oversees millions of health and retirement plans, and its enforcement priorities increasingly center on areas that directly impact plan participants. One of the most prominent areas continues to be cybersecurity, with investigations focusing on how plan sponsors and service providers protect sensitive participant data, oversee vendors, and prevent fraud, particularly in relation to retirement distribution and plan assets.

Another major focus is compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA). The DOL is intensifying efforts to identify barriers that limit access to mental health and substance use disorder benefits. This includes reviewing plan design and administration, such as restrictive treatment limitations, network adequacy, and the required comparative analysis of non-quantitative treatment limitations (NQTLs).

The DOL is also continuing enforcement under the No Surprises Act, ensuring that plans apply the prudent layperson standard for emergency services, use appropriate in-network cost-sharing, and provide required disclosures and notices. Claims processing timelines and payment dispute processes may also be reviewed.

Beyond health plan compliance, EBSA is maintaining a strong focus on fiduciary responsibilities, including how employers and plan fiduciaries select and monitor investments, evaluate fees, manage conflicts of interest, and oversee plan performance. There is also continued scrutiny around benefit distributions, ensuring participants receive benefits in a timely and accurate manner, particularly in cases involving delayed payments, abandoned plans, or unclaimed assets.

Additionally, the DOL is prioritizing investigations involving the misuse of employee contributions, such as failing to timely remit payroll deductions to benefit plans or improperly using those funds for business purposes. These types of violations are viewed as high-risk and may involve more serious enforcement action.

Overall, the 2026 enforcement priorities reflect a shift toward participant protection, data security, and access to benefits. Employers should take a proactive approach by reviewing their plan governance, vendor relationships, compliance documentation, and internal processes to ensure alignment with these evolving expectations.

Question of the Month

Q. Can an employee cancel their voluntary life or voluntary critical illness coverage outside of open enrollment without a qualifying life event if these benefits are post-tax?

A. If the elections are made post-tax, they do not have to comply with the Qualifying Life Event rules that apply to pre-tax elections. So if the plan allows an employee to drop coverage at any time, the employer allows this flexibility, there is no concern with employees dropping after-tax coverages without a Qualifying Life Event.

Answers to the Question of the Month are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.