Under the Affordable Care Act (ACA), certain businesses are classified as Applicable Large Employers (ALEs).
This designation is not just a label—it carries specific obligations for health insurance reporting and compliance.
An Applicable Large Employer is any business that has 50 or more full-time employees or full-time equivalents (FTEs) during the previous calendar year. Once a business meets this threshold, it becomes subject to ACA rules, including the employer mandate and required IRS reporting.
For business owners or HR professionals who are new to the ACA landscape, understanding what it means to be an ALE is the first step in avoiding costly penalties and maintaining compliance.
What is the 50-Employee Threshold?
The ACA’s 50-employee rule is a critical milestone for growing businesses. But determining whether your organization has crossed that threshold isn’t as straightforward as counting heads.
The ACA defines a full-time employee as someone who works at least 30 hours per week or 130 hours per month. However, employers also need to consider full-time equivalent employees.
This includes part-time workers whose combined hours add up to the equivalent of full-time positions. For example, two employees who each work 15 hours per week count as one full-time equivalent.
To determine ALE status, an employer must calculate the total number of full-time employees and FTEs across all months of the previous calendar year, then divide by 12. If the average is 50 or more, the business is considered an ALE for the current year.
This calculation can be tricky, especially for seasonal businesses or those with fluctuating staffing needs.
Still, the IRS requires employers to assess this annually to determine their reporting obligations.
What ACA Reporting is Required?
Once a business becomes an ALE, it must comply with specific ACA reporting rules. The most important of these is filing IRS Forms 1095-C and 1094-C.
Form 1095-C is used to report health coverage offers and enrollment information for each full-time employee.
It includes details about whether the employer offered minimum essential coverage, the affordability of that coverage, and whether the employee accepted or declined it.
Form 1094-C serves as the transmittal form, summarizing the 1095-C data and providing an overview of the employer’s compliance for the tax year.
Together, these forms allow the IRS to determine whether the employer has met the requirements under the employer shared responsibility provisions of the ACA. In addition to filing these forms with the IRS, employers must also furnish copies of Form 1095-C to their employees, who may need it when filing their personal taxes.
Even if an ALE doesn’t offer health insurance, it is still required to submit Form 1095-C to report that no offer was made. Failure to file, or filing incomplete or inaccurate forms, can lead to significant IRS penalties.
Key Deadlines and Penalties
Understanding and meeting ACA reporting deadlines is critical for avoiding penalties.
For ALEs, the key deadlines typically fall in the first quarter of each year:
- Employers must furnish Form 1095-C to employees by early March.
- If filing by paper, forms must be submitted to the IRS by the end of February.
- If filing electronically, the deadline extends to the end of March.
The IRS imposes strict penalties for late filings or incorrect submissions. As of recent guidelines, the penalty for failing to file an information return is around $310 per form, with a maximum annual cap for large-volume filers.
Penalties may be higher if the IRS determines the failure was due to intentional disregard. Penalties can also apply if the employer fails to offer affordable health coverage to at least 95% of its full-time employees.
These penalties are calculated monthly and can grow quickly depending on the employer's size and the number of employees affected.
For growing businesses, these potential fines underscore the importance of recognizing ALE status and acting quickly to comply with ACA reporting requirements.
How 1095EZ Online Supports ALEs
Navigating ACA compliance can be overwhelming, especially for businesses that have recently crossed the 50-employee threshold. That’s where 1095EZ Online can help.
1095EZ Online is designed to simplify ACA reporting for employers of all sizes, including new ALEs.
Their platform is built to work independently of your existing back-office software, meaning you don’t need to overhaul your systems to become compliant.
Once you’re ready to file, 1095EZ Online helps you generate accurate 1095-C and 1094-C forms, validates the data to reduce errors, and submits everything electronically to the IRS.
It also helps ensure your employees receive their forms on time, keeping you compliant with IRS requirements. Whether you’ve just crossed the 50-employee mark or are preparing for your first year as an ALE, 1095EZ Online offers a turn-key solution that takes the stress and guesswork out of ACA reporting.
With their support, your business can focus on growth while staying ahead of IRS compliance demands.
How Seasonal and Variable Hour Employees Affect ALE Status
Businesses that hire seasonal workers or have employees with fluctuating hours may find it difficult to determine if they've crossed the ALE threshold. The ACA allows some flexibility here, but only under certain conditions.
Seasonal workers who are employed for 120 days or fewer during the calendar year generally do not count toward the 50-employee threshold.
However, if those workers stay on longer, or if your business frequently brings on variable-hour employees, their hours must be factored into your full-time equivalent (FTE) calculation.
The key is tracking all hours worked monthly, regardless of employee classification.
Employers must calculate FTEs for each month, average those numbers, and use that figure to determine ALE status for the following year. Failing to track variable-hour workers accurately can push a business over the ALE line without them even realizing it.
The Employer Shared Responsibility Provision
Once a business is classified as an ALE, it becomes subject to what the IRS calls the “employer shared responsibility provision.”
This means you may be required to offer affordable health coverage to at least 95% of your full-time employees and their dependents.
There are two primary penalties associated with this provision. The first applies if you fail to offer any coverage to full-time employees, and one of them receives a premium tax credit on the Health Insurance Marketplace.
The second applies if you offer coverage, but it’s deemed either unaffordable or doesn’t meet minimum value standards.
These penalties can be thousands of dollars per employee and are calculated monthly.
That’s why understanding the shared responsibility rules is essential for all ALEs. It’s not just about reporting—it’s about offering the right kind of coverage, too.
Understanding Form 1095-C in More Detail
Form 1095-C isn’t just a formality; it’s how the IRS tracks whether you’re meeting your ACA responsibilities as an ALE. The form is divided into three parts:
- Part I contains basic identifying information about the employee and employer.
- Part II details the offer of coverage, including the type of coverage offered, the lowest-cost monthly premium for self-only coverage, and the safe harbor codes used to indicate affordability.
- Part III is used only by employers who self-insure, and it includes details about covered individuals and their months of coverage.
Each form must be carefully completed. Even small mistakes—like missing Social Security numbers or using the wrong codes—can result in fines. Employers are encouraged to use software or services that double-check data for accuracy before submission.
What If You’re Close to 50 Employees but Not Quite There?
Some business owners may think that if they haven’t hit 50 employees yet, they don’t need to worry about the ACA.
But that mindset can lead to a rushed, last-minute scramble once the threshold is crossed. If your business is close—say, in the 45- to 49-employee range—you should begin preparing now.
Consider implementing systems to track hours, monitor employee classifications, and plan for ACA-compliant health coverage.
Getting ahead of the ALE designation helps prevent costly missteps and allows time to choose the right compliance strategy.
Working with a solution like 1095EZ Online gives your business the structure it needs, even before you're technically an ALE. Their tools help you forecast employee trends and prepare for the shift with minimal disruption.
When to Start Preparing for ALE ACA Requirements
If your company is approaching 50 employees, now is the time to prepare for ALE ACA requirements.
Waiting until the year-end can leave you scrambling to collect data and risking errors that could lead to penalties. Start by tracking employee hours monthly so you can project whether you’ll cross the ALE threshold.
If your workforce fluctuates, use a conservative approach and assume you may qualify as an ALE. It’s better to be ready than caught off guard.
If your business does cross the threshold, be sure to assess your current health insurance offerings to ensure they meet ACA standards for affordability and minimum value.
And begin reviewing your HR and payroll systems to make sure you can accurately track and report employee data.
Proactive planning makes the transition smoother, and using a specialized platform like 1095EZ Online ensures you don’t miss a step along the way.
Don’t Let ALE Status Catch You Off Guard
Crossing the 50-employee mark is a major milestone, but it also brings new responsibilities under the ACA.
Once your business qualifies as an Applicable Large Employer, you must begin complying with strict reporting requirements, including furnishing and filing Forms 1095-C and 1094-C.
Failing to recognize your ALE status or ignoring your reporting obligations can result in significant penalties from the IRS. That’s why it’s important to understand the ALE ACA rules, prepare early, and use tools that make compliance easier.
With 1095EZ Online, you don’t have to face this process alone.
Their intuitive platform simplifies ACA reporting, ensures timely submissions, and keeps your business in full compliance with federal regulations.
If you’re not sure whether you qualify as an ALE—or if you know you do and need help managing the requirements—1095EZ Online is here to support your success.
Get started today with your ACA reporting compliance!