Glossary

Applicable large employer (ALE)

Under the ACA, an employer with an average of 50 or more full-time and full-time-equivalent employees in the prior year, subject to the employer mandate.

Also called: ALE, large employer under the ACA, employer mandate employer

An applicable large employer is one that employed an average of at least 50 full-time employees, counting full-time equivalents, on business days in the preceding calendar year (26 CFR 54.4980H-1(a)(4)). A full-time employee averages 30 or more hours of service a week, or 130 hours in a month. Part-time hours convert to equivalents by dividing monthly hours, capped at 120 per person, by 120. Related companies under common control are counted together.

An ALE must offer affordable, minimum-value coverage to at least 95% of its full-time employees and their dependents, and report on Forms 1094-C and 1095-C. Under IRC section 4980H for 2026, the penalty is $3,340 per full-time employee, less the first 30, if the employer misses the 95% offer test and any full-time employee gets a premium tax credit. If coverage is offered but is unaffordable or lacks minimum value, the penalty is $5,010 for each full-time employee who gets a premium tax credit. The 2026 affordability threshold is 9.96% of income.

Status is decided year to year, so a growing business can cross 50 without noticing. The guide on the ACA employer mandate explains the safe harbors, and the ACA employer mandate (ALE) calculator tests your headcount.

Last reviewed October 10, 2026

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Related terms

Full-time equivalent (FTE) A way to convert part-time hours into the number of full-time workers they equal, used to decide whether the ACA employer mandate or a tax credit applies. ICHRA An employer-funded account that reimburses employees tax-free for individual health insurance premiums they buy themselves, with no federal dollar cap. QSEHRA An employer-funded account for businesses under 50 full-time equivalent employees that reimburses workers for premiums and medical costs up to an annual cap. ERISA The 1974 federal law setting fiduciary, reporting and disclosure standards for private-sector retirement and welfare benefit plans, enforced by the DOL. COBRA A federal law letting workers and families keep their employer's group health coverage for a limited time after a job loss or other qualifying event.

Related guides

The ACA employer mandate: who must offer coverage and the 2026 penalties Who is an applicable large employer, what coverage avoids the 4980H penalties, and the 2026 figures: 9.96% affordability, $3,340 and $5,010. ACA reporting: Forms 1094-C and 1095-C for large employers Who files Forms 1094-C and 1095-C, 2026 deadlines, the website-notice option under the Paperwork Burden Reduction Act, e-filing and penalty amounts. Benefits for part-time and seasonal workers: ACA and eligibility rules When part-time, seasonal and variable-hour employees count under the ACA employer mandate, how look-back measurement works, and what else you must offer them. Form 5500 for health and welfare plans: who files and when Who files Form 5500 for group health, life and disability plans: the 100-participant and 80-120 rules, deadlines, schedules and 2026 late-filing penalties. Group health insurance for small businesses: how it works and what it costs How small-group health coverage is sold, rated and administered: eligibility, contribution rules, enrollment, plan options and the ACA rules that shape it. ICHRA explained: individual coverage HRAs for employers How an ICHRA works: tax treatment, employee classes, allowance rules, the affordability test (9.96% for 2026), ACA mandate treatment, notices and risks.

Related tools

ACA employer mandate (ALE) calculator Tells you whether last year's headcount makes you an applicable large employer and estimates the 4980H(a) and 4980H(b) payments you could face in 2026 or 2027. Group health insurance cost and affordability calculator Totals what a group health plan costs you and your employees, then tests employee-only affordability against the ACA safe harbors for 2026 or 2027. QSEHRA and ICHRA allowance calculator Prices a QSEHRA against the 2026 IRS maximums and an ICHRA by employee class, then sets both beside the cost of a group health plan. Small business health care tax credit calculator Estimates the IRC 45R credit the way Form 8941 does: up to 50% of premiums (35% for tax-exempt employers), reduced by the FTE and average-wage phase-outs.

Related en español

¿El seguro para negocios es obligatorio por ley? Ninguna ley exige un seguro para negocios en general, pero los estados exigen compensación al trabajador y auto; arrendadores y contratos piden más.