Determining ALE Status
Any employer that has 50 or more full-time employees or full-time equivalents is considered an Applicable Large Employer (ALE). ALE status is based on the average number of full-time employees employed for the previous tax year.
There are two methods of determining full-time employee status:
- Monthly measurement method: The employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month.
- Look-back measurement method (for determining penalties only): An employer may determine the status of an employee as a full-time employee during what is referred to as the stability period, based upon the hours of service of the employee in the preceding period, which is referred to as the measurement period. The look-back measurement method for identifying full-time employees is available only for purposes of determining and computing the employer penalty, and NOT for purposes of determining if the employer is an ALE.
An hour of service is:
- Each hour for which an employee is paid, or entitled payment, for the performance of duties for the employer.
- Each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.
- Services performed in the following capacities are not counted as hours of service:
- Volunteer employees
- Students performing work-study
- Members of religious order subject to a vow of penalty
- Employees that receive compensation that is not U.S. source income
For employees that have hours of service that are challenging to identify or track, employers are required to use a reasonable method of crediting hours of service that is consistent with the employer shared responsibility provisions.
For more information about determining ALE status, please go to: https://www.irs.gov/affordable-care-act/employers/identifying-full-time-employees.
Determining ALE status
If the average number of full-time employees and average number of full-time equivalents add up to 50 or more, the employer is considered an Applicable Large Employer, or an ALE. An ALE will need to file 1095-C forms for each of their full-time employees, and any part-time employees who enrolled in coverage.
If the average number of full-time employees and average number of full-time equivalents add up to less than 50, the employer is not considered an ALE, and may need to file a 1095-B form. A non-ALE will need to file a 1095-B form if the employer is self-insured, or offers an HRA plan to employees. To determine if the employer is fully-insured or self-insured, please see the How do I determine whether I am fully-insured or self-insured? article.