What is an Applicable Large Employer (ALE)?

An Applicable Large Employer (ALE) is a company with 50 or more full-time employees, including full-time equivalents (FTEs). ALEs are subject to the Affordable Care Act’s employer mandate, which requires offering affordable, minimum value health coverage to eligible employees and filing annual IRS reports.

How do I calculate if my company is an ALE?

To determine ALE status, combine your full-time employees with your full-time equivalent employees. Full-time employees work 30 or more hours per week. Part-time employee hours are aggregated and divided by 120 hours to calculate FTEs. If the total equals or exceeds 50, your company is an ALE.

What are the reporting responsibilities of an ALE?

ALEs must file Forms 1094-C and 1095-C with the IRS annually to report offers of health coverage and provide 1095-C statements to employees. These reports verify compliance with ACA employer mandate requirements.

How can ACA-Track help my company as an ALE?

ACA-Track automates the collection and monitoring of employee hours, generates accurate ACA forms, performs error audits, and supports electronic IRS filing. It integrates with payroll and HR systems, simplifying compliance for ALEs.

What does it mean to be an applicable large employer

What Does It Mean to Be an Applicable Large Employer (ALE)?

Navigating the Affordable Care Act (ACA) can be complex, especially when it comes to understanding your company’s obligations. One of the foundational concepts in ACA compliance is the designation of an Applicable Large Employer, or ALE. But what exactly does it mean to be an ALE? Why is this classification so critical? And how can your company confidently manage compliance? This detailed guide will clarify these points and introduce you to a trusted partner, ACA-Track, that simplifies ACA compliance from start to finish.

Understanding the Basics: What Is an Applicable Large Employer?

An Applicable Large Employer (ALE) is defined under Section 4980H of the Internal Revenue Code as part of the Affordable Care Act. The classification depends primarily on workforce size:

Employers with 50 or more full-time employees, including full-time equivalent employees (FTEs), are considered ALEs.
Full-time employees are those who work an average of 30 or more hours per week or at least 130 hours per month.
Part-time employees’ hours are combined to calculate FTEs by dividing total monthly hours (capped at 120 hours per employee) by 120.

Example:
If your company has 40 full-time employees and 20 part-time employees working 60 hours each in a month, your FTE count is:
40 (full-time) + (20 × 60 = 1200 hours) ÷ 120 = 10 FTEs
Total = 50 employees → You are an ALE.

The ALE designation matters because it triggers specific obligations related to offering health insurance coverage and reporting to the IRS.

Why Does Being an ALE Matter?

If your company is an ALE, the ACA requires you to:

Offer affordable health insurance coverage that meets minimum value standards to your full-time employees and their dependents.
File annual reports with the IRS (Forms 1094-C and 1095-C) to demonstrate compliance.
Potentially face penalties (employer shared responsibility payments) if you fail to offer coverage or offer coverage that does not meet ACA standards, and employees receive premium tax credits from the Marketplace.

If you do not meet ALE criteria, your company may not be subject to these stringent requirements, although other ACA provisions might still apply.

How Does an Employer Determine ALE Status?

ALE status is based on your workforce in the previous calendar year. For example, your workforce size in 2024 determines if you are an ALE for 2025. This look-back method helps employers plan accordingly.

Because workforce composition can fluctuate — especially with part-time, seasonal, or variable-hour employees — it’s crucial to:

Accurately track employee hours worked (including part-time and variable hour employees).
Maintain data that supports your calculations to defend your ALE status if audited.

The Importance of Tracking Part-Time and Variable Hour Employees

Tracking hours for part-time and variable-hour employees is not optional—it’s vital. This data helps determine if these employees meet the full-time threshold during a measurement period, typically ranging from 3 to 12 months. Those who do are eligible for health coverage during a subsequent stability period.

If you fail to track actual hours worked:

You cannot prove an employee worked fewer than 30 hours weekly.
You risk penalties if employees obtain Marketplace coverage with premium tax credits that your company should have offered.

ACA Reporting Requirements for ALEs

If your company is an ALE, you must file:

Form 1094-C: The transmittal form sent to the IRS summarizing your company’s ACA compliance.
Form 1095-C: Individualized statements to each full-time employee detailing the health coverage offered.

These forms help the IRS verify whether ALEs meet their responsibilities under the employer shared responsibility provisions.

Deadlines:

Distribute Form 1095-C to employees by January 31 (extensions may apply).
File Form 1094-C and associated 1095-Cs with the IRS by March 31.

Employers with 250 or more employees must file electronically, requiring a Transmitter Control Code (TCC) approval from the IRS prior to submission.

How ACA-Track Makes ALE Compliance Simple and Secure

Managing ACA compliance can be overwhelming without the right tools. That’s where ACA-Track excels. This all-in-one ACA compliance solution:

Collects actual hours worked for 100% of your workforce, including part-time and variable-hour employees.
Monitors employee eligibility with alerts for coverage thresholds and events such as waivers and leaves.
Generates accurate 1094-C and 1095-C reports ready for federal and state reporting.
Supports electronic XML file submission to the IRS, ensuring smooth filing even for large employers.
Provides monthly line code audits and error correction support to maintain compliance integrity.

ACA-Track’s secure, cloud-based platform integrates seamlessly with payroll, HRIS, and financial management systems, consolidating all ACA data in one user-friendly interface.

Features that Help Your Organization Stay on Track

Customizable Dashboard: Tailor the view of your data with sorting, filtering, grouping, and color-coded alerts for quick issue identification.
Snap Shot Summary: View historical ACA data snapshots to understand employee status changes over time.
Flexible Configuration: Adjust measurement, administrative, and stability periods, thresholds, and other ACA-specific rules with ease.
Data Security: ACA-Track meets rigorous security standards, encrypting sensitive personal data and using secure protocols for data transfers.

What If Your Company Receives a Penalty Letter?

Non-compliance can lead to IRS penalty letters, such as the notorious Letter 226-J, which outlines proposed shared responsibility payments. If you receive such a letter, timely action is critical:

Review the detailed employee list and subsidy information.
Check internal records for errors or qualifying coverage offers.
Prepare to respond within 30 days.
Engage legal counsel or a trusted ACA compliance service like ACA-Track for expert assistance.

Conclusion: Is Your Company an ALE?

Being an Applicable Large Employer means your company is responsible for meeting ACA coverage and reporting requirements. Understanding your ALE status, tracking hours diligently, and filing accurate reports are key to avoiding costly penalties.

For companies of all sizes needing reliable ACA compliance support, ACA-Track offers a proven solution tailored to your needs. With expert guidance and advanced technology, ACA-Track helps you navigate ACA complexities confidently and securely.

Learn more about how ACA-Track can help your company master ACA compliance:
ACA-Track — Be confident with a proven ACA compliance solution.

If you want, I can help you with more specific content—like how to calculate FTEs with examples, or a deeper dive into penalty avoidance strategies. Just let me know!

What does it mean to be an applicable large employer?