Definition
An applicable large employer is an organization that, under the Affordable Care Act, averaged at least 50 full-time employees, including full-time equivalent employees, during the prior calendar year. ALE status is determined each year and affects the employer's health coverage responsibilities and reporting obligations to the IRS.
Also known as: ALE, large employer under the ACA
How it works
The IRS defines a full-time employee as someone who averages at least 30 hours of service per week, or at least 130 hours of service in a calendar month. To test ALE status, an employer adds the full-time employees for each month of the prior year, adds the full-time equivalents for each month, and divides the combined total by 12.
Full-time equivalents are calculated by totaling the monthly hours of non-full-time employees, capping each person at 120 hours, then dividing by 120.
Related companies are generally combined and treated as one employer, even if each is under 50. A seasonal worker exception applies when the excess over 50 lasts 120 days or fewer in the calendar year. A new employer is an ALE if it reasonably expects, and actually has, an average of at least 50 full-time employees in its first year.
Example
A restaurant group with three separately incorporated locations employs 22, 19, and 15 full-time staff, plus part-timers equal to 8 full-time equivalents. Because the entities are related, the combined count of 64 makes the group an ALE.
How it differs from similar terms
Applicable Large Employer vs COBRA. ALE status depends on an average of 50 full-time employees under the ACA, while COBRA applies to employers with 20 or more employees and concerns continuing group health coverage after a qualifying event.
Related terms and guides
Frequently asked questions
How do I calculate whether I am an ALE?
Add each month's full-time employee count and full-time equivalent count for the prior calendar year, then divide by 12. If the result is at least 50, you are an ALE. Full-time means an average of 30 hours of service per week, or 130 hours in a calendar month.
Do related companies count together?
Yes. According to the IRS, related companies are generally combined and treated as a single employer when determining ALE status, even if each one individually has fewer than 50 employees. Employers with common ownership should run the calculation across the whole group rather than entity by entity.
Is there an exception for seasonal workers?
Yes. The IRS says an employer is not considered to exceed 50 employees if the excess, lasting 120 days or fewer during the calendar year, consists of seasonal workers. Employers should document the seasonal roles and dates so that the position can be supported if questioned.