Applicable Large Employer (ALE) FAQs | Vitable Health

Determining Applicable Large Employer Status

1. What is an Applicable Large Employer (ALE)?

An Applicable Large Employer (ALE)  is a federal classification created under the Affordable Care Act (ACA). ALEs are businesses with an average of 50 or more full-time employees, including full-time equivalents (FTEs), subject to the ACA’s Employer Mandate.

2. How do I know if my business qualifies as an ALE?

To determine if your business qualifies as an ALE, you must add the total number of full-time employees and full-time equivalent (FTE) employees for the previous calendar year. If this average is 50 or more, your business qualifies as an ALE and must comply with ACA requirements.

3. Which employees count toward ALE status?

The ACA and IRS set specific guidelines to determine which employees are considered when assessing ALE status. Here are how the different employee classifications impact your ALE determination:

4. How do I determine full-time equivalents (FTEs)?

Part-time employees are counted towards your ALE status as full-time equivalents (FTEs). FTEs are determined by combining monthly hours of part-time employees (capped at 120 per employee), then divided by 120.

Example :

Five part-time employees each work 100 hours in a month.

(5 employees × 100 hours) ÷ 120 = 4.17 FTEs.

Learn more in our article, What is a Full-Time Equivalent (FTE) Employee?

5. How do I calculate ALE status if my workforce fluctuates month to month?

The IRS looks at your average number of full-time and full-time equivalent employees over the entire calendar year. Here’s how it works:

If the annual average reaches 50 or more, you’re an ALE.

Seasonal Exemption

If your employee count exceeds 50 for 120 days or fewer due only to seasonal workers, you might not be considered an ALE, provided:

This exemption is designed to protect businesses that hire additional help during seasonal peaks, such as holidays, harvest time, or summer.

6. If I own multiple businesses, are they counted together for ALE determination?

Yes. Under IRS Employer Aggregation Rules, related businesses with common ownership or control must combine employees from each business for ALE determination.

If together these businesses have 50 or more full-time (and FTE) employees, each separate business (called an ALE member) must follow ACA rules—even if individually they have fewer than 50 employees.

In short, the shared ALE status applies at the group level, but compliance responsibilities and penalties are handled at the individual company level.

Compliance Requirements for Applicable Large Employers

7. What are the ACA requirements for ALEs?

Two ACA provisions specifically apply to Applicable Large Employers (ALEs):

  1. Employer Shared Responsibility Provisions
  2. Employer Information Reporting Provisions

Under the Employer Shared Responsibility Provisions, ALEs must:

Under the Employer Information Reporting Provisions, ALEs must:

8. What’s considered “affordable” coverage?

Coverage is considered affordable if the employee's contribution for the lowest-cost self-only plan doesn't exceed 9.02% of their household income (2025 rate).

The affordability percentage is updated annually, so it's important to verify the current rate each year.

9. What is Minimum Essential Coverage and Minimum Value?

10. Are ALEs required to offer coverage to spouses?

No. Coverage for spouses is not required. However, ALEs are required to offer coverage to dependents, defined as biological and adopted children under age 26.

11. What happens if an employee declines offered health insurance?

You won’t face ACA penalties if an employee declines your health insurance, as long as you offered coverage that is:

Just make sure you document your offer and the employee’s decision to decline—this protects you in case of an audit.

Reporting and Recordkeeping Requirements

12. What forms are ALEs required to file with the IRS?

13. When are ACA forms due to the IRS?

ALEs must meet annual IRS reporting deadlines to stay compliant with the ACA. Here are the key due dates for furnishing forms to employees and submitting them to the IRS:

14. Which employees receive a Form 1095-C?

Each full-time employee should receive a Form 1095-C, even if they declined the offered coverage. The form shows details about the health coverage you offered, and it's required for employees to accurately complete their tax returns. In some cases, part-time employees may also receive a 1095-C if they were enrolled in coverage under a self-funded plan.

15. Is the deadline to furnish 1095-C forms to employees different from the IRS filing deadline?

Yes. The deadline to furnish Form 1095-C to employees is typically earlier than the deadline to file with the IRS.

For example, in most years:

Be sure to verify the exact dates each year, as deadlines can shift slightly.

16. What if I make a mistake or file late?

If you make a mistake or file late, the IRS may assess penalties for each incorrect or late form. Corrections should be submitted promptly to minimize fines.

17. Do I need to file if I just became an ALE this year?

ALE status is based on your workforce size during the previous calendar year. If your business averaged 50 or more full-time and full-time equivalent employees last year, then you are considered an ALE this year and must file IRS Forms 1094-C and 1095-C for this calendar year (due next filing season).

However, if you just crossed the 50-employee threshold this year, you won’t be required to file until the following tax season, assuming your average remains at or above 50 for the full year.

18. What are my ACA reporting responsibilities if I offer a self-funded health plan?

Self-funded plans trigger additional ACA reporting obligations. If your business offers a self-funded (self-insured) health plan (including an ICHRA), you must complete Part III of Form 1095-C to report the individuals (employees and dependents) who were actually enrolled in coverage. This is in addition to completing Parts I and II of the form.

If you’re not an ALE but offer self-funded coverage, you may still have reporting requirements under Forms 1094-B and 1095-B.

19. Do state mandates affect my ACA reporting?

Yes. Several states, including California, New Jersey, Massachusetts, Rhode Island, and the District of Columbia, have their own health coverage mandates that may require separate reporting from what is filed with the IRS.

If you have employees who live or work in these states, you may need to submit additional forms directly to the state, even if you’ve already filed your federal Forms 1094-C and 1095-C. Be sure to check each state’s requirements and deadlines, as they may vary.

Non-Compliance Penalties

20. What happens if my business fails to meet ACA compliance requirements?

If your business is an Applicable Large Employer (ALE) and fails to meet ACA coverage requirements, you could face two types of penalties:

Part A Penalty – Section 4980H(a): Failure to Offer Coverage

Part A penalty applies if you do not offer Minimum Essential Coverage (MEC) to at least 95% of your full-time employees and their dependents, and at least one full-time employee receives a premium tax credit on the Health Insurance Marketplace.

Example :

If you have 100 full-time employees and don’t offer MEC:

Part B Penalty – Section 4980H(b): Unaffordable or Inadequate Coverage

If you do offer coverage, but it is not affordable or does not meet minimum value, and at least one full-time employee receives a premium tax credit, you could face the Part B penalty.

Example :

If 10 employees receive tax credits due to unaffordable or insufficient coverage:

21. Are there any other penalties ALEs should be aware of?

Yes. In addition to ACA coverage penalties, ALEs may face other consequences for compliance failures, including:

Staying up to date on both federal and state-level requirements is key to avoiding unexpected penalties.

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Understanding your ACA responsibilities is just the beginning—choosing the right benefits partner helps you stay compliant, control costs, and provide coverage your employees actually use.

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Whether you're an ALE exploring alternatives to traditional group plans or looking to strengthen your current offerings, Vitable simplifies compliance while putting meaningful, everyday healthcare within reach.

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