As the cannabis industry continues to mature and scale, one area where many employers find themselves dangerously underprepared is in ACA compliance.

The Affordable Care Act (ACA), enacted in 2010 under the Obama administration, introduced sweeping healthcare reforms in the United States.

A cornerstone of the ACA is the Employer Shared Responsibility Provisions (often referred to as "employer mandate"), which require employers with 50 or more full-time equivalent employees (FTEs) to provide health insurance coverage or face potential penalties.

For cannabis businesses navigating complex workforces, multi-state operations, and fluctuating headcounts, the risks of non-compliance are substantial—and often hidden in plain sight. And unlike more traditional industries, cannabis operators must juggle these federal compliance issues while operating under state-legal, federally restricted frameworks.

In this post, we’ll explore:

• What ACA compliance actually entails

• The high cost of getting it wrong

• Why cannabis operators are particularly vulnerable

• How Paragon Payroll + isolved make compliance simple and stress-free

• Real-life feedback from operators like you

The ACA Basics (and Why They Matter in Cannabis)

The ACA requires "Applicable Large Employers" (ALEs)—those with 50 or more FTEs—to offer Minimum Essential Coverage (MEC) that is both affordable and provides Minimum Value (MV) to their full-time employees, or risk facing steep penalties. An FTE is calculated based on a 30-hour workweek. So even if an employer has fewer than 50 full-time employees, a significant number of part-time employees can push them into ALE status when hours are aggregated.

MEC refers to health coverage that meets the ACA’s minimum standards, while MV means the plan pays at least 60% of the total allowed cost of benefits. "Affordability" is determined using IRS safe harbor rules, which cap employee premiums for the lowest-cost plan under a certain percentage of household income.

But there’s more to it:

• You must track employee status over time (especially variable-hour and seasonal staff)

• You must offer coverage to qualifying employees within a reasonable timeframe

• You must file IRS forms 1094-C and 1095-C annually—and accurately

Form 1095-C is provided to employees to show health coverage offered, while Form 1094-C is submitted to the IRS as a summary of all employee-level data. Errors in either can lead to penalties or audits.

Failure to meet these requirements can trigger Employer Shared Responsibility Payments (ESRP)—penalties that can add up to thousands or even millions of dollars per year.

Many cannabis operators assume ACA requirements don’t apply to them or that their benefits broker or payroll provider is managing it. However, due to the intricacies of the ACA and the specific labor models in cannabis, that assumption can be risky.

What’s at Stake: The Financial and Operational Risks

Let’s get specific. As of 2025:

• Not offering compliant coverage to at least 95% of your full-time workforce could cost you $2,970 per employee annually

• Offering coverage that isn’t affordable or doesn’t meet minimum value could still result in a $4,460 per affected employee penalty

These penalties are enforced by the Internal Revenue Service (IRS) and typically arise from mismatches in data submitted on 1094-C/1095-C forms or when employees receive premium tax credits on the public marketplace.

These are not idle threats. Cannabis companies are particularly vulnerable due to their historically rapid hiring, inconsistent scheduling, and lack of integration across platforms. The IRS has already started issuing penalty letters under the ACA (known as Letter 226J) to cannabis operators who didn’t realize they were on the radar.

Operators may also face costs beyond fines—like legal expenses, reputational damage, and the administrative burden of correcting years of misreporting. In some cases, penalties can be levied retroactively for several years if the IRS discovers non-compliance during an audit.

The Cannabis Compliance Gap

Here’s the problem: traditional payroll or HR providers often miss the nuances of ACA in cannabis. Why?

• Variable-hour roles: Budtenders, trimmers, delivery drivers—all may qualify under lookback measurement periods

• Seasonal hiring surges: Cultivation-heavy months can trigger ACA status changes

• Multi-EIN, multi-state complexity: Operators with different business entities across jurisdictions need consolidated ACA tracking

• Lack of cannabis-specific support: Most vendors aren’t built to serve this industry—and don’t pick up the phone when things go sideways

The ACA’s lookback measurement method allows employers to track employees over a 3- to 12-month period to determine if they are full-time. This is essential in cannabis, where workers may fluctuate between full-time and part-time across harvest or retail cycles.

Additionally, cannabis companies often operate under multiple Employer Identification Numbers (EINs) due to licensing or state-by-state incorporation strategies. Without a single source of truth, maintaining accurate ACA reporting across EINs can become nearly impossible.

Common ACA Mistakes We See:

• Assuming a broker is “handling” ACA when they’re not

• Missing measurement and stability periods for variable-hour employees

• Filing incorrect or late 1094/1095 forms

• Offering coverage that isn’t actually affordable under IRS definitions

• Not documenting offers and eligibility correctly

The ACA also requires employers to retain documentation of all offers of coverage, waivers, and employee responses. If your current system doesn’t automatically track these records—or worse, if they live in scattered emails and spreadsheets—you could be at risk during an audit.

Another common mistake: assuming seasonal employees don’t count toward ACA eligibility. Depending on tenure and hours, they very well might. Misclassifying employees or using incorrect safe harbor rules for affordability are also recurring problems we see in cannabis.

"We Didn’t Know How Exposed We Were"

That’s the phrase we hear most often from new clients. One CFO put it like this:

"We thought our benefits broker handled it. They didn’t. We had over 80 employees and zero ACA tracking. The IRS fine could’ve sunk us."

Another operator told us:

"We used spreadsheets and hoped for the best. Our headcount was growing too fast to keep up. Paragon fixed it before it became a problem."

For many cannabis businesses, the realization of ACA exposure only comes after receiving a letter from the IRS. By then, it’s often too late to avoid penalties. Prevention—not reaction—is the key to protecting your business.

These stories are not outliers. They’re the norm in a rapidly growing industry with few purpose-built solutions. Paragon’s goal is to eliminate these blind spots before they create costly liabilities.

How Paragon's Team and Technology Keep You Compliant Without the Chaos

Paragon’s cannabis-committed ACA solution is fully embedded within the platform, which means your compliance tracking is automated, audit-ready, and accurate from day one. We use the leading Human Capital Management (HCM) platform trusted by over 5 million employees nationwide. Our integration ensures that payroll, HR, benefits, and ACA compliance are connected—not siloed.

With Paragon, you get:

• Automated eligibility tracking using lookback measurement periods

• Real-time alerts when employees become eligible

• Seamless 1094/1095 form generation and e-filing

• Full transparency across multiple EINs and states

• A dedicated support team that actually understands cannabis

We don’t believe in "set it and forget it." Our ACA specialists proactively audit your data, test your configurations, and ensure compliance before filing deadlines approach. We also ensure your affordability tests align with IRS safe harbor methods: Rate of Pay, Federal Poverty Line, or W-2 wages.

Through our ACA Compliance Navigator, employers can model ACA impacts in real time, generate preview versions of ACA forms, and maintain year-round compliance without scrambling during tax season.

Real Feedback from Cannabis Operators:

"It’s all in one system—I’m not chasing reports anymore."

"ACA used to be terrifying. Now it’s just handled."

"We asked the same question three times. Paragon never made us feel dumb. Just helped."

"Honestly, I didn’t even know what ACA meant until they broke it down for me. Now I feel protected."

These aren’t just testimonials—they’re reflections of the emotional burden operators carry when compliance is uncertain. With Paragon, clients find clarity, peace of mind, and renewed trust in their systems.

Many of our clients come to us frustrated, overwhelmed, or burned by previous providers. Once we implement our ACA solution, the most common response we hear is: "Why didn’t we do this sooner?"

Who This Matters To:

If you’re any of the following, this blog post is for you:

• CFOs overseeing 50+ employees in cannabis

• HR Directors struggling with benefit eligibility and reporting

• Controllers responsible for IRS compliance and filings

• Multi-entity operators scaling across states

Even if you’re not at 50 FTEs yet, but expect to grow soon, preparing now can save you from future headaches. ACA tracking begins long before you hit the threshold. Waiting too long can lead to retroactive obligations and limited correction windows.

As states like New York, New Jersey, and Ohio continue expanding retail footprints, more cannabis employers will cross the ACA threshold without realizing it. It’s critical to get ahead of the curve.

ACA compliance isn’t a nice-to-have. It’s a legal requirement—and a massive financial liability if done wrong. But with the right partner, it doesn’t have to be hard.

If you’re not 100% sure you’re compliant—or you’ve been relying on disconnected systems and assumptions—let’s fix that. Now.

👉 Let’s Talk ACA

We’re cannabis committed. We answer the phone. And we make sure you’re covered, for real.

Let Paragon be the proactive partner your ACA compliance deserves—because no operator should lose sleep over preventable risk.