Why ALE Status Matters
Only Applicable Large Employers (ALEs) are subject to the ACA’s Employer Shared Responsibility provisions (IRC §4980H) – commonly called the ACA’s Employer Mandate.
ALEs must offer qualifying health coverage to their full-time employees (and dependents) or potentially face penalties.
How ALE Status is Determined
- An employer is an ALE if it averaged 50 or more full-time employees (including full-time equivalents [FTEs]) during the prior calendar year.
- ALE status is determined once annually (typically as of January 1) by reviewing the average employee counts for all 12 months of the prior year.
- Once established, ALE status remains in effect for the entire calendar year ahead, even if workforce size changes mid-year.
Other Calculation Information
- Full-time employees are those averaging 30+ hours per week (or 130+ per month).
- Full-time equivalents (FTEs) are a calculation method, not actual employees. To determine FTEs:
- Add all part-time employees’ hours of service for the month, capped at 120 per employee.
- Divide the total by 120.
- The result = the number of full-time equivalents (FTEs) for that month.
- FTEs are used only to determine ALE group size. Employers are not required to offer coverage to part-time employees or to “FTEs.”
- Employers under common ownership or control may be combined as a Controlled Group for ALE determination. The group’s combined size determines ALE status, but penalties are assessed separately by employer.
- ALEs must also meet ACA reporting obligations by filing Forms 1094-C and 1095-C annually with the IRS.