Definition
An applicable large employer (ALE) is an employer that averaged at least 50 full-time employees, including full-time equivalents, in the prior calendar year. ALE status is set each year under the Affordable Care Act and decides whether the employer must offer health coverage to full-time staff and report it to the IRS.
Also known as: ALE, large employer under the ACA
Key figures
United States (federal)As of Oct 13, 2026
- ALE threshold
- 50 full-time employees, including equivalentsIRS, under Internal Revenue Code section 4980H
- Full-time employee (weekly test)
- 30 hours of service a week on averageIRS, under Internal Revenue Code section 4980H
- Full-time employee (monthly test)
- 130 hours of service in a monthIRS, under Internal Revenue Code section 4980H
- Full-time equivalents
- Part-time hours (up to 120 each) divided by 120IRS, under Internal Revenue Code section 4980H
- Seasonal worker exception
- Excess over 50 for 120 days or fewerIRS, under Internal Revenue Code section 4980H
How it works
The test looks back at the prior calendar year, month by month. A full-time employee is anyone who averages 30 hours of service a week, or 130 hours in the month. Part-time hours turn into full-time equivalents: add each part-timer's hours for the month, counting no more than 120 per person, and divide the total by 120.
Add full-time employees and equivalents for each month, sum the twelve months and divide by 12. An average of 50 or more makes the employer an ALE for the current year. Companies under common ownership are counted together as one employer. A seasonal exception applies when the count goes over 50 for 120 days or fewer and the extra workers are seasonal.
An ALE is subject to the employer shared responsibility provisions and the ACA information reporting, which is why ACA compliance software tracks hours and the monthly counts all year rather than once at year end.
Example
A restaurant group runs three separately incorporated locations under common ownership. Each one alone is well under the line, but the IRS counts related companies together. Adding the three locations' full-time staff to the full-time equivalents from their part-timers gives a monthly average above the threshold, so the group is an ALE for the next year.
How it differs from similar terms
Applicable Large Employer vs COBRA. ALE status decides whether an employer must offer coverage to current full-time employees, based on an average of 50 full-time employees including equivalents. COBRA is a separate federal law that lets people keep the group plan after their coverage would end.
Free checklist
Buyer's checklist: Benefits Administration Software
Everything to check before you sign with a benefits administration provider, on one printable page.
- 10 questions to ask every vendor, with how to verify each answer
- 12 capabilities to confirm in a demo
- 6 pricing questions about fees outside the quote
- A scorecard of the 5 products we rank highest, with what we verified
Facts as of Oct 25, 2026 · LeadChange Research Team
What it checks
- Carrier connectivity
- Payroll deduction sync
- Eligibility rules and waiting periods
- Life events and mid-year changes
- Dependent verification
- COBRA administration
- ACA reporting
- Carrier invoice reconciliation
and 2 more questions in the full checklist
Sample question
Carrier connectivity
List your carriers and ask which get an automated 834 feed, which get a file you send yourself and which get paper forms. Ask who builds and tests each feed, whether it costs extra and how rejected records come back.
Frequently asked questions
What is an applicable large employer?
An employer that averaged at least 50 full-time employees, counting full-time equivalents, during the prior calendar year. The status is reset every year. An ALE falls under the Affordable Care Act's employer shared responsibility provisions and must file the related reports with the IRS.
How do I calculate whether I am an ALE?
For each month of the prior year, count full-time employees and add the full-time equivalents from part-time hours. Sum the twelve monthly totals and divide by 12. An average of 50 or more makes you an ALE for the current year.
Who counts as a full-time employee for ALE purposes?
Anyone who averages at least 30 hours of service a week in a month, which the IRS also lets employers measure as 130 hours in the month.
How are full-time equivalent employees calculated?
Add the hours of every employee who is not full time for the month, counting no more than 120 hours for any one person, and divide the total by 120. The result, which can include a fraction, is that month's number of full-time equivalents.
Do related companies count together for ALE status?
Yes. Companies under common ownership, such as a controlled group, are treated as one employer for the ALE test, even when each company alone is small. Run the calculation across the whole group, not entity by entity.
Is there an exception for seasonal workers?
Yes. An employer is not an ALE if its workforce goes over 50 full-time employees, including equivalents, for 120 days or fewer in the year and the employees above 50 in that period are seasonal workers. Keep records of the seasonal roles and dates.
Compare ACA compliance options
See every ACA compliance product we rank, with verified prices and features.