What defines an Applicable Large Employer (ALE) under the ACA?

An ALE is an employer with 50 or more full-time employees or full-time equivalents (FTEs), calculated based on hours worked by part-time and variable hour employees. ALE status determines whether the employer must offer affordable health coverage to full-time employees and report to the IRS.

Why is it important for ALEs to track hours for part-time and variable hour employees?

Tracking hours for part-time and variable hour employees allows ALEs to accurately identify which employees meet the 30-hours-per-week threshold for full-time status. This ensures compliance with ACA mandates to offer health insurance to eligible employees and avoid penalties.

What ACA forms must ALEs file and what are the deadlines?

ALEs must file IRS Form 1094-C and 1095-C annually. Form 1095-C is provided to employees by January 31, and Form 1094-C must be submitted to the IRS by March 31. Employers with 250 or more employees must file electronically.

What penalties can ALEs face for failing to comply with ACA requirements?

Non-compliant ALEs may face shared responsibility payments for not offering affordable, minimum value coverage, as well as penalties for late or incorrect ACA filings. Penalties can range from hundreds to thousands of dollars per affected employee, making compliance critical.

How does ACA-Track help ALEs manage their ACA compliance obligations?

ACA-Track streamlines ACA compliance by automating employee hours tracking, eligibility monitoring, and IRS reporting. It integrates with payroll and HR systems, generates accurate 1094-C and 1095-C forms, helps fix reporting errors, and stores data securely for IRS audits.

ALEs and the Affordable Care Act: What the Law Requires of You

The Affordable Care Act (ACA) transformed employer responsibilities in the United States, especially for Applicable Large Employers (ALEs). Navigating the requirements can be complex, but understanding your obligations is crucial to avoiding costly penalties and ensuring compliance. This comprehensive guide breaks down what ALEs need to know and do under the ACA, how to track employee hours effectively, and the role of ACA compliance solutions like ACA-Track in simplifying the process.

What is an Applicable Large Employer (ALE)?

Under Section 4980H of the Internal Revenue Code, ALEs are employers with 50 or more full-time employees or full-time equivalent employees (FTEs). This includes:

Full-time employees: Those working an average of at least 30 hours per week or 130 hours per month.
Full-time equivalents: Part-time employees whose combined hours equal the workload of full-time employees.

For example, if your business has 40 full-time employees and 20 part-time employees each working 60 hours a month, the calculation would show you have 50 FTEs (40 full-time + (20 × 60) / 120 = 10 FTEs), making you an ALE.

Why Tracking Employee Hours Matters

Tracking Part-Time and Variable Hour Employees

For ALEs, offering health insurance to full-time employees—and sometimes their dependents—is mandatory. To identify full-time employees accurately, you must track actual hours worked for part-time and variable hour employees.

Why? The law defines full-time status by averaging actual hours worked over a measurement period (usually 3 to 12 months). If an employee averages 30+ hours per week, they are considered full-time and eligible for coverage.
Risk of not tracking: If you fail to track hours and an employee claims marketplace coverage with a premium tax credit, your company may face significant penalties for not offering affordable, minimum value coverage.

ACA Compliance Reporting: What You Must Do

ALEs must report annually to the IRS and employees using:

Form 1095-C: Details about the offer of health insurance coverage to employees.
Form 1094-C: The transmittal form summarizing the 1095-Cs submitted to the IRS.

These forms help the IRS verify employer compliance with ACA mandates.

Deadlines:

Distribute Form 1095-C to employees by January 31.
File Forms 1094-C and 1095-C with the IRS by March 31.

If your company has over 250 employees, electronic filing is required.

Consequences of Non-Compliance

Failing to comply with ACA requirements can result in:

Shared Responsibility Penalties: For not offering coverage, offering unaffordable coverage, or not meeting minimum value standards.
Filing Penalties: For late, incorrect, or missing forms, ranging from $50 to $270 per form, with higher penalties for significant delays.
IRS 226-J Penalty Letters: Notices of non-compliance requiring a response within 30 days, often necessitating legal or expert assistance.

Challenges Employers Face in ACA Compliance

Complex data gathering: ACA data comes from payroll, HR, benefits, and finance departments, often requiring data integration.
Tracking variable-hour employees: Requires monitoring hours from various sources, including manual timesheets, automated clocks, and mobile entries.
IRS reporting requirements: Strict formatting, electronic filing mandates, and adherence to data privacy laws.

How ACA-Track Simplifies ACA Compliance

ACA-Track offers a comprehensive, user-friendly ACA compliance solution designed specifically for ALEs:

Key Features

Data Collection: Accurately gathers hours worked for all employee types from multiple sources — time clocks, payroll, HRIS, and mobile apps.
Eligibility Monitoring: Tracks employee eligibility thresholds with real-time alerts, helping you stay ahead of compliance issues.
Robust Reporting: Generates and files IRS Forms 1094-C and 1095-C electronically, ensuring accuracy and timeliness.
Error Correction: Identifies and helps fix ACA reporting errors before submission.
Flexible Configuration: Customize measurement periods, thresholds, waiver codes, and affordability parameters to fit your business rules.
Data Security: Cloud-based with SSAE 16 certification, SOC 2 Type 2 compliance, encrypted personal data, and secure data transfers.

Why Choose ACA-Track?

A dedicated Client Success Advisor guides you through compliance complexities.
Total integration with your existing payroll and HR systems reduces manual effort.
Comprehensive dashboards and filters give you complete visibility into ACA data.
Electronic IRS filing support, including Transmitter Control Code (TCC) management and schema validation.

What Departments Should Handle ACA Compliance?

ACA compliance touches multiple areas, so collaboration between departments is essential:

Human Resources: Employee status changes, eligibility tracking.
Payroll: Actual hours worked, wage information.
Benefits: Coverage offers and waivers.
Finance: Budgeting for penalties, cost of coverage, and reporting fees.

Often, responsibility rests with the CFO, HR Director, or Benefits Manager, but success depends on cross-department teamwork.

Final Thoughts: Staying ACA-Compliant with Confidence

ACA compliance is complex and ever-evolving, with significant penalties for non-compliance. For ALEs, tracking employee hours accurately, understanding your reporting obligations, and filing correct forms on time are non-negotiable.

By leveraging a trusted ACA compliance partner like ACA-Track, your company gains the tools, expertise, and peace of mind needed to stay compliant — from collecting and monitoring employee hours to generating IRS-ready reports and handling penalty notices.

Don’t risk costly penalties — be proactive with ACA compliance. Visit ACA-Track today to learn more about how their tailored solutions can meet your organization’s unique needs.