ACA employer mandate guide: 50+ FTEs

Not legal or tax advice: consult employment counsel or a tax advisor. This page is general information to help an employer organise a review. Every statement below is attributed to a federal page we read on the date shown, and none of it is a determination about your company.

Who is an applicable large employer

The IRS page on determining ALE status (retrieved 14 Oct 2026) states that an employer with at least 50 full-time employees, including full-time equivalent employees, on average during the prior year is an ALE for the current year. The regulation at 26 CFR 54.4980H-1(a)(4) (retrieved 14 Oct 2026) uses the same average-of-at-least-50 test over business days in the preceding calendar year. Status is set each calendar year from the prior year’s workforce, so a company growing toward 50 is measured on what it averaged last year, not on today’s headcount.

The same IRS page states two limits worth knowing. A seasonal-worker exception applies where the workforce exceeds 50 for 120 days or fewer in the calendar year and the excess employees are seasonal workers. And a business that did not exist on any business day of the prior year is an ALE if it reasonably expects to, and actually does, employ an average of at least 50 full-time employees (including FTEs) on business days in the current year (IRS, retrieved 14 Oct 2026).

How full-time and FTE counting works

Per the IRS ALE page (retrieved 14 Oct 2026), a full-time employee is one averaging 30 hours of service per week, or with at least 130 hours of service in a calendar month. The IRS Q&A (Q20, retrieved 14 Oct 2026) adds that the 130-hour monthly figure is treated as equal to 30 hours per week. 26 CFR 54.4980H-1(a)(24) defines an hour of service as each hour for which an employee is paid, or entitled to payment, for the performance of duties, and includes paid time away such as vacation, illness or jury duty.

Full-time equivalents come from everyone who is not full-time. The IRS ALE page (retrieved 14 Oct 2026) gives two steps: total the monthly hours of all non-full-time employees, counting no more than 120 hours per employee, then divide that total by 120. To get the annual figure it adds each month’s full-time employee count to that month’s FTE count and divides by 12. Its example rounds down to the next lowest whole number.

Aggregation across related entities

The IRS ALE page (retrieved 14 Oct 2026) states that employers under common ownership or otherwise related under Internal Revenue Code section 414 are generally combined and treated as a single employer when determining ALE status, while each member’s shared responsibility liability is still determined separately. The Q&A (Q11, retrieved 14 Oct 2026) gives the example of an individual owning 80 percent or more of two businesses. A group of small entities can therefore be an ALE together even though none is one alone.

The two payments, in plain terms

The statute’s two payments are referred to as 4980H(a) and 4980H(b). Under the IRS Q&A (Q43 and Q53, retrieved 14 Oct 2026), a 4980H(a) payment arises when an ALE does not offer coverage, or offers it to less than 95 percent of its full-time employees and their dependents, and at least one full-time employee receives a premium tax credit. It is calculated on the number of full-time employees (minus up to 30) multiplied by the $2,000 amount as adjusted, with part-time and FTE employees excluded from that calculation.

A 4980H(b) payment (Q54, retrieved 14 Oct 2026) applies to an ALE that does offer coverage to 95 percent, and is calculated on the number of full-time employees receiving a premium tax credit for the month multiplied by 1/12 of the $3,000 amount as adjusted. It is capped so it can never exceed what the ALE would owe under 4980H(a). The IRS shared responsibility page states that an ALE member owes at most one of the two. The Q&A also describes a special rule where coverage was offered to all but five full-time employees and five is greater than 5 percent of the workforce.

The IRS shared responsibility page (retrieved 14 Oct 2026) states that for calendar year 2024 the adjusted $2,000 amount is $2,970 and the adjusted $3,000 amount is $4,460, and lists 2019 to 2024. The page we read showed no later year. Because these amounts are indexed, confirm the current-year figure on IRS.gov.

Offer of coverage, minimum value and affordability

The IRS minimum value and affordability page (retrieved 14 Oct 2026) states that minimum value means the plan covers at least 60 percent of the total allowed cost of benefits expected to be incurred under the plan. It states that an employer can use one of three safe harbors for affordability instead of household income: Form W-2 wages, the employee’s rate of pay, or the federal poverty line, and that these apply to the employer shared responsibility provisions and do not affect premium tax credit eligibility.

The IRS Q&A (Q39 and Q40, retrieved 14 Oct 2026) states that coverage is affordable if the employee’s required contribution is no more than 9.5 percent (as adjusted) of household income, and lists the adjusted percentage by year from 2015 (9.56%) through 2023 (9.12%). It also states an ALE may use the safe harbors only if it offers coverage to 95 percent of its full-time employees and their dependents. The affordability page we read states no percentage for any year, and we found no page giving the current-year percentage, so confirm the current-year figure on IRS.gov.

Forms 1094-C and 1095-C

The IRS ALE reporting page (retrieved 14 Oct 2026) states that each ALE member must file, that Form 1095-C is the employee-level statement and Form 1094-C the transmittal that accompanies the 1095-C forms, and that members of an aggregated group each file on their own. The Form 1095-C page states it is filed and furnished to any employee of an ALE member, and the Form 1094-C page states the form must be filed with the 1095-C.

On timing, the ALE reporting page states statements are furnished by January 31 of the year after the coverage year, and returns are filed by February 28 (March 31 if filed electronically). It states that an ALE filing 250 or more information returns must file electronically. We read no instructions document, so check the current-year Form 1094-C and 1095-C instructions for the year in question, since dates can shift when January 31 or the filing date falls on a weekend or holiday.

Where a PEO or ASO fits

The IRS Q&A (Q33, retrieved 14 Oct 2026) states that an ALE is treated as offering coverage if it is offered on the ALE’s behalf by, among others, a staffing firm in certain cases. The portion of the Q&A we read does not discuss professional employer organizations or administrative services arrangements, so we make no statement about who counts the employees, who files or who bears a payment under those models. That allocation sits in the contract; see what a PEO is, PEO vs ASO and co-employment explained.

Where this sits: an employer that offers group health coverage also has continuation-coverage duties when coverage is lost. The notice deadlines, election window and 102 percent premium cap are in the COBRA employer guide.

Where this sits: the plan documents and annual reporting that sit behind group health coverage, including the summary plan description, the summary of benefits and coverage and the Form 5500 filing, are in the ERISA and Form 5500 guide.

What we could not confirm

The earlier IRS affordability and 1094-C/1095-C reporting URLs we tried returned HTTP 404, and the 1095-C and 1094-C pages we did read are short descriptions rather than instructions. We read no instructions document for either form, no Q&A section beyond the portion fetched, and only part of 26 CFR 54.4980H-3; 54.4980H-4 was not read. We found no IRS page stating the current-year affordability percentage or a penalty amount after 2024. We read no page on how any PEO or ASO model changes ALE counting or reporting. Nothing here is filled in from memory.