An applicable large employer, or ALE, is an employer that had an average of 50 or more full-time employees, including full-time equivalents, during the prior calendar year. ALEs are subject to the ACA employer shared responsibility rules and must report health coverage offers to the IRS on Forms 1094-C and 1095-C.
Key takeaways
- Full-time means averaging at least 30 hours a week or 130 hours a month.
- Part-time hours count too: total monthly part-time hours divided by 120 gives full-time equivalents.
- Related companies under common ownership are combined to test ALE status.
- For 2026, coverage is affordable if the employee's cost for self-only coverage is under 9.96% of household income.
How applicable large employer works
To test ALE status, count full-time employees for each month of the previous year, add full-time equivalents from part-time hours, and average the 12 monthly totals. If the average is 50 or more, you're an ALE for the current year (IRS, Determining if an employer is an applicable large employer). A seasonal worker exception can apply if you exceed 50 only because of seasonal staff for 120 days or fewer.
ALEs must offer minimum essential coverage that's affordable and provides minimum value to at least 95% of full-time employees and their dependent children, or risk an employer shared responsibility payment. Affordability for 2026 is 9.96% of household income, up from 9.02% in 2025 (Liebert Cassidy Whitmore, 2026 ACA affordability percentage). Since employers rarely know household income, most use the W-2, rate of pay, or federal poverty line safe harbors.
Every ALE files Forms 1094-C and 1095-C each year, describing the coverage offered to each full-time employee month by month.
Applicable large employer example
A restaurant group has 38 full-time employees all year and 40 part-time employees who together work 1,920 hours a month.
| Full-time employees per month | 38 |
|---|---|
| Full-time equivalents, 1,920 / 120 | 16 |
| Monthly total | 54 |
With 54 a month on average, the group is an ALE for the next year, even though only 38 people are full-time. It must offer coverage to those full-time employees and file 1095-C forms. Our FTE calculator runs the count.
Why applicable large employer matters for employers
Crossing the 50 threshold changes your obligations overnight, and many growing companies only notice when an IRS penalty letter arrives. The letter, Letter 226-J, can propose six-figure payments based on employees who received marketplace subsidies.
Coverage costs are high: KFF puts the average single premium at $9,325 and family at $26,993 for 2025 (KFF 2025 Employer Health Benefits Survey). ALEs need to plan contributions so the cheapest self-only option stays affordable under the safe harbor they choose. ACA compliance software tracks hours, measurement periods, and 1095-C codes, which is far easier than spreadsheets once you have variable-hour staff.
Common applicable large employer mistakes to avoid
Counting only full-time staff
Part-time hours convert into full-time equivalents for the ALE test.
Ignoring related companies
Commonly owned businesses are combined into one controlled group.
Using household income for affordability
Use a safe harbor you can actually prove, such as rate of pay.
Skipping measurement periods for variable-hour staff
Look-back measurement lets you decide full-time status fairly and defensibly.
Applicable large employer: questions people also ask
How many employees make an applicable large employer?
What counts as full-time under the ACA?
What is the ACA affordability percentage for 2026?
Do ALEs have to offer health insurance?
What forms do ALEs file?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>An applicable large employer, or ALE, is an employer that had an average of 50 or more full-time employees, including full-time equivalents, during the prior calendar year. ALEs are subject to the ACA employer shared responsibility rules and must report health coverage offers to the IRS on Forms 1094-C and 1095-C.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/applicable-large-employer/">HRTally HR Glossary, Applicable large employer</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.