ALE Status Determination

Each year, employers check whether last year's monthly average of full-time and full-time-equivalent employees hit 50 or more. If so, you are an Applicable Large Employer subject to the employer mandate and ACA reporting for the whole current year.

See the Step-by-Step ProcessView ALE Calculation Worksheet
What Determine if you're an Applicable Large Employer (ALE) for the current year using last year's monthly averages. Full-time is 30 hours/week or 130 hours/month; FTEs come from part-time hours (cap 120 per person per month, divided by 120).
Who All employers should evaluate ALE status annually, including related companies under common ownership. A prior-year average of 50 or more FT/FTE makes you an ALE for the entire current calendar year.
If ALE, you must Offer minimum essential coverage (MEC) to at least 95% of FT employees and dependents that is affordable and of minimum value (MV), and file Forms 1094-C/1095-C annually. Affordability by plan year: 9.02% (2025), 9.96% (2026). See the Affordability Calculation page.
Risk ALEs that fail to meet offer or affordability requirements face significant Employer Shared Responsibility Payments (ESRP) under IRC Section 4980H. Late or incorrect 1094-C/1095-C filings carry additional information-return penalties. See the ACA Reporting page for current penalty amounts.
50+
ALE threshold

A prior-year average of 50 or more FT/FTE makes you an ALE for the whole current year.

Jan-Feb
Run the calculation

Compile prior-year monthly counts early enough to inform OE and 1095-C prep.

12
Months averaged

Sum all 12 monthly totals and divide by 12 to get the annual average.

Trigger Typical Timing Notes
Compile prior-year monthly FT counts & PT hours Jan-Feb (each year) Use 12 monthly totals; apply the seasonal-worker exception if applicable.
Determine ALE status for current year Immediately after the calculation Status applies for all 12 months of the current calendar year.
If ALE, prep offers & affordability Before open enrollment / plan-year start Design eligibility and administration processes to meet the 95%+ offer standard.
1095-C furnish to employees (if ALE) Late January to early March (annually) See the ACA Reporting page for deadlines and delivery rules.
1094-C/1095-C file with IRS (if ALE) Paper: late Feb; E-file: Mar 31 (typical) See the ACA Reporting page for current deadlines and e-file thresholds.
Retain ALE workpapers & support Ongoing Keep with ACA reporting records in case of inquiries or audits.
Trigger: Compile prior-year monthly FT counts & PT hours
Timing: Jan-Feb (each year)
Notes: Use 12 monthly totals; apply the seasonal-worker exception if applicable.
Trigger: Determine ALE status for current year
Timing: Immediately after the calculation
Notes: Status applies for all 12 months of the current calendar year.
Trigger: If ALE, prep offers & affordability
Timing: Before open enrollment / plan-year start
Notes: Design eligibility to meet the 95%+ offer standard.
Trigger: 1095-C furnish and 1094-C/1095-C file (if ALE)
Timing: Furnish early March; e-file Mar 31
Notes: See the ACA Reporting page for deadlines and e-file thresholds.
Trigger: Retain ALE workpapers & support
Timing: Ongoing
Notes: Keep with ACA reporting records in case of inquiries or audits.
  • Monthly count of full-time employees (30+ hrs/week or 130+ hrs/month).
  • Monthly part-time hours (cap 120 per person per month for the calculation).
  • Ownership/controlled-group chart: common ownership, parent/subsidiary relationships, and related entities.
  • Seasonal worker dates: if headcount exceeded 50 for 120 days or fewer and the excess were seasonal workers as defined by the IRS.
  • Union, PEO, and leased worker arrangements: to confirm who is the common-law employer.
  • Prior-year coverage offer details: helpful context if you determine you are an ALE.
1
For each month last year
  • Count full-time employees (30+ hrs/week or 130+ hrs/month).
  • Add part-time hours (cap 120 per person), then divide by 120 to get monthly FTEs.
  • Add FT count plus PT FTEs to get the monthly total.
2
AverageSum all 12 monthly totals and divide by 12. If the result is 50 or more, you're an ALE this year.
3
Apply the seasonal-worker exceptionIf you exceeded 50 for 120 days or fewer and the excess workers were seasonal, you may not be an ALE.
4
Apply aggregationCombine related employers under IRC Section 414 controlled-group and affiliated-service rules. If the group hits 50+, each company is an ALE member.
5
If ALEOffer coverage to at least 95% of FT employees and dependents, ensure affordability using a safe harbor, and prepare 1094-C/1095-C reporting.
6
DocumentSave monthly worksheets, assumptions, and any seasonal or aggregation analysis.

Determining ALE status is an internal calculation. Once you confirm you are an ALE, two sets of obligations follow: offering coverage to full-time employees, and filing Forms 1094-C and 1095-C with the IRS each year. The deadlines, delivery methods, and content requirements for both are covered on the ACA Reporting (1094-C/1095-C) page.

  • Monthly counts and FTE calculationsMonthly FT counts, PT hours rollups, and FTE calculations with any caps applied.
  • Ownership and seasonal analysisOwnership and controlled-group analysis, and any seasonal-worker exception support.
  • Reporting and affordability recordsCopies of 1094-C/1095-C (if ALE) and affordability safe-harbor worksheets.
  • Offer methodologyEvidence of plan eligibility terms and the 95%+ offer methodology.

Do owners and related companies count together?

Often yes. Apply the IRC Section 414 controlled-group and affiliated-service rules. If a group of related companies collectively averages 50+ FT/FTE, each company in the group is an ALE member, even if it has only 10 employees on its own. This is the most common source of surprise ALE status for smaller employers with related entities.

Are seasonal workers excluded from the count?

Only under specific conditions: the seasonal-worker exception applies only if your headcount exceeded 50 for no more than 120 days during the year and the employees who pushed you over 50 were seasonal workers as defined by the IRS. Both conditions must be met. If you rely on this exception, document it carefully.

We dropped below 50 employees mid-year, are we still an ALE?

Yes. ALE status is determined once, based on the prior year's average, and runs for the entire current calendar year. A mid-year drop in headcount doesn't change it.

Which affordability percentage applies?

Affordability is measured by plan year, not calendar year. Use the IRS-published percentage for the plan year that includes the coverage period. For plan years beginning in 2025: 9.02%. For plan years beginning in 2026: 9.96%.

What about union, PEO, or leased employees?

Count common-law employees regardless of whether a third party administers their payroll or benefits. If you are the common-law employer, those workers count toward your ALE threshold and toward the 95%+ offer requirement.

What are the consequences if we get the determination wrong?

If you incorrectly conclude you are not an ALE and a full-time employee receives a premium tax credit through the marketplace, the IRS can assess an Employer Shared Responsibility Payment (ESRP) under Section 4980H. The IRS proposes ESRP assessments via Letter 226J; if you receive one, respond within the deadline (typically 30 days) with your ALE calculation worksheets, offer records, and affordability documentation. Penalty amounts are covered on the ACA Reporting (1094-C/1095-C) page.

When exactly should ALE status be determined?

Annually, using prior calendar-year data. The practical target is January or February, early enough to inform open enrollment planning, affordability calculations, and 1095-C preparation for the current year.

  • New employers: If you weren't in existence last year, you can be an ALE if you reasonably expect (and actually have) 50 or more FT/FTE this year.
  • Mid-year acquisitions or divestitures: Apply aggregation each month to the then-current group and document ownership changes and their effective dates.
  • Governmental and educational employers: Special measurement and academic-break rules may apply for hour-of-service determinations.
  • State individual-mandate reporting: Several states require additional reporting separate from federal 1095-C obligations, including California, DC, Massachusetts, New Jersey, and Rhode Island. Requirements vary by state and may apply even if you are not an ALE for federal purposes. See the State Individual Mandate Reporting page.

Use this worksheet to run the prior-year calculation and document your ALE determination. Print it, fill it in, and keep it with your ACA records. If you have related companies under common ownership, run a separate column (or a separate worksheet) for each entity, then aggregate the totals.

ALE DETERMINATION WORKSHEET

Company: _________________________________  |  Prior Calendar Year: _________

Completed by: _________________________  |  Date: _____________

Formula: For each month, count employees who worked 130 or more hours as full-time (FT). For part-time employees, total their hours for the month (cap at 120 per person), then divide by 120 to get FTEs. Add FT plus FTEs for the monthly total. Average all 12 monthly totals. If the result is 50 or more, you are an ALE for the current calendar year.

Month Full-Time Employees (130+ hrs) Part-Time Total Hours (capped at 120/person) FTE Count (PT Hours / 120) Monthly Total (FT + FTE)
January
February
March
April
May
June
July
August
September
October
November
December
12-Month Total_______
Annual Average (12-Month Total divided by 12)_______

RESULT

  • ☐   Annual average 50 or more: you are an ALE for the current calendar year.
  • ☐   Annual average under 50: you are not an ALE. (If you were close, check the seasonal-worker exception below.)

SEASONAL-WORKER EXCEPTION CHECK (complete only if your average exceeded 50)

  • ☐   Did headcount exceed 50 for more than 120 days? If yes, the exception does not apply.
  • ☐   Were the employees who pushed the count above 50 seasonal workers as defined by the IRS? If no, the exception does not apply.
  • ☐   Both conditions met (exceeded 50 for 120 days or fewer; excess employees were seasonal): you may not be an ALE. Document this conclusion and confirm with your benefits advisor or ERISA counsel before relying on it.

CONTROLLED GROUP NOTE

If your organization has related entities under common ownership, complete a separate worksheet for each entity, then add the Monthly Total columns across all entities before calculating the annual average. Each entity in a group that collectively averages 50 or more is an ALE member.

[HR Use Only] ALE determination confirmed by: _________________________  |  Date: _____________  |  Filed with ACA records: ☐