Determining Applicable Large Employer (ALE) Status
Benefit Comply can review your reporting to help identify where there a risk of penalty under §4980H (the “employer mandate”). More Info >
All applicable large employers (ALEs) are required to offer medical coverage to full-time employees and their dependents and then report annually on such offers of coverage using Forms 1094-C and 1095-Cs. ALEs are employers who averaged 50 FTEs in the previous calendar year.
Here are the general calculation steps for purposes of determining average FTEs from the previous calendar year:
Step 1: Calculate the number employees with 120 or more hours of service for each calendar month
Step 2: Aggregate hours of service for each month for any other employees and divide the total by 120
Step 3: Add the numbers obtained in Steps 1 and 2 for each month
Step 4: Add up the totals from each month from Step 3 and divide the sum by 12
Tips to Keep in Mind
- Count hours of service for all employees, including seasonal employees and union employees, when going through the above steps. Do not count hours for owners or independent contractors.
- If an employee only worked a couple days during a month, still enter the number of hours of service for that month.
- If the employer is part of a larger controlled group or affiliated service group under §414 rules due to common ownership or shared management/services, it is necessary to aggregate FTEs across all related entities for purposes of determining ALE status.
- After going through Steps 1 – 4, if it’s determined that the employer only exceeded 50 FTEs for 120 days or less due to seasonal workers, the employer may qualify for the seasonal worker exception.
An employer that averaged 50 or more FTEs during 2022, either alone or as part of a larger controlled group or affiliated service group (an “aggregated ALE group”), must offer medical coverage to full-time employees and their dependent children as required by §4980H in 2023, and then must report on such offers of coverage early in 2024.