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. Set each year under the Affordable Care Act, ALE status brings the employer shared responsibility provisions (offer affordable coverage to full-time employees or potentially owe the IRS a payment) and reporting on offers of coverage.

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 equivalents1IRS, under Internal Revenue Code section 4980H
Full-time employee (weekly test)
30 hours of service a week on average1IRS, under Internal Revenue Code section 4980H
Full-time employee (monthly test)
130 hours of service in a month1IRS, under Internal Revenue Code section 4980H
Full-time equivalents
Part-time hours (up to 120 each) divided by 1201IRS, under Internal Revenue Code section 4980H
Seasonal worker exception
Excess over 50 for 120 days or fewer1IRS, 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. Per the IRS, companies with a common owner, or otherwise related under section 414 of the Internal Revenue Code, are generally combined and treated as a single employer for determining ALE status, while potential liability for a shared responsibility payment is determined separately for each company. 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, based on an average of 50 full-time employees including equivalents, decides whether the employer shared responsibility provisions apply: offer affordable coverage that provides minimum value to full-time employees, or potentially owe a payment to the IRS. COBRA is a separate federal law that lets people keep the group plan after their coverage would end.

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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 its employer information reporting provisions for offers of coverage.

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?

Generally, yes. Companies with a common owner, or otherwise related under section 414 of the Internal Revenue Code, are combined and treated as one employer for the ALE test, even when each company alone is small. Potential liability for a shared responsibility payment is then determined separately for each company in the group, the IRS says.

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.

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Sources

The 2 pages this page's facts come from. The date beside each is our last check of the facts taken from it (the oldest, when they differ). The numbers beside the figures above link here.

Quotes from the sources
  1. Internal Revenue Service Determining if an employer is an applicable large employer“If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year” “an employee who has on average at least 30 hours of service per week during the calendar month”
  2. irs.gov IRS: Employer shared responsibility provisions