ACA for Applicable Large Employers (ALEs)

If you are reading this and asking "do I have to file 1094-C and 1095-C?", the question hinges on one definition: are you an Applicable Large Employer (ALE)? This page walks through the actual counting rules — not the marketing version, the IRS version — so you can answer that with confidence and move on with your filing.

The Headline Threshold

You are an ALE for the current calendar year if you had an average of 50 or more full-time and full-time-equivalent (FTE) employees during the prior calendar year. The lookback is the part that catches people — your 2026 ALE status is determined by your 2025 headcount, not your 2026 headcount.

If you are an ALE for the year, you have an obligation to:

Offer minimum essential coverage to at least 95% of your full-time employees (and their dependents) or face §4980H(a) penalties
Make sure that coverage is affordable and provides minimum value, or face §4980H(b) penalties for any employee who receives a premium tax credit
File Form 1094-C and one Form 1095-C per full-time employee with the IRS, and furnish 1095-Cs to those employees

This page is about the third bullet — the filing obligation that Thomas Ledger handles. But the first two are why the IRS is reading what you filed, so the math matters.

How the 50-FTE Count Actually Works

The IRS does not just count heads. The calculation has two pieces, run for each month of the prior calendar year, then averaged.

Step 1: Count full-time employees

A full-time employee for ACA purposes is one who works 30 or more hours per week on average, or 130 hours in a calendar month. Salaried employees with no precise hours record are deemed full-time if they are reasonably expected to work 30+ hours weekly. Part-timers, seasonal workers, and variable-hour employees are not full-time in this step.

Step 2: Add full-time equivalents (FTEs)

Now you take all the employees who were not counted as full-time in Step 1 and convert their hours into "FTE units." Add up the total hours worked by non-full-time employees in the month (capped at 120 hours per employee), divide by 120. That is your FTE count for the month.

Step 3: Add Step 1 + Step 2, average across the year

For each month, add full-time employees + FTEs. Average those 12 monthly totals. If the average is 50 or more, you are an ALE for the next calendar year.

An example

Say you have 35 full-time employees year-round, and 20 part-timers who each work 80 hours per month. Each month: 35 full-timers + (20 part-timers × 80 hours ÷ 120) = 35 + 13.33 = 48.33. Average across 12 months = 48.33. Not an ALE.

Now the same 35 full-timers but with 30 part-timers at 80 hours: 35 + (30 × 80 ÷ 120) = 35 + 20 = 55. ALE. You crossed the threshold through your part-time workforce, not by hiring more full-timers.

The Controlled-Group Rule (This Catches People)

If two or more businesses share common ownership under the IRC §414 controlled-group rules, their employee counts are aggregated for the ALE determination. You cannot escape ALE status by splitting your workforce across multiple LLCs or holding companies.

What that means in practice: a private-equity-owned group of three operating LLCs with 25, 20, and 18 full-time employees respectively is one Aggregated ALE Group with 63 full-time employees. Each LLC files its own 1094-C and 1095-Cs, but each 1094-C references the others in Part IV, and §4980H penalties are calculated at the group level.

Common controlled-group situations:

Parent-subsidiary — one entity owns 80%+ of one or more other entities (common stock ownership test)
Brother-sister — five or fewer common owners hold 80%+ of two or more entities with 50%+ identical ownership
Combined group — any combination of the above involving three or more entities

If you operate across multiple EINs and any of those situations describe your ownership, plan to file as an Aggregated ALE. The Thomas Ledger ACA Filer Pro (251–500) and ACA Filer Elite tiers are built to handle aggregated filings; we generate the cross-references in Part IV so the 1094-Cs reconcile across the group.

The Seasonal-Worker Exception

If your headcount exceeded 50 FTE for 120 days or fewer during the year, and the workers responsible for the spike were seasonal (employed for 6 months or less in roles that recur every year — agricultural workers, retail holiday hires), you may be exempt from ALE status that year.

"Seasonal worker" is narrower than it sounds. It is not "any temporary employee." It is workers in a position that recurs seasonally — Christmas-tree-farm workers, summer-camp staff, ski-resort lifties. A staffing-agency placement is not seasonal under this rule, even if temporary.

When You First Become an ALE

You file your first 1094-C and 1095-Cs for the year you are an ALE — not the lookback year. If your 2025 averaged FTE count crossed 50, you are an ALE for 2026, and you file TY2026 forms (in early 2027) for the first time. The 2025 forms you don't owe; the 2026 ones you do.

First-time ALEs sometimes get a one-year transition relief if certain conditions are met (e.g., no offer of coverage in the first three months of the year is excused if the employer offers coverage by April 1 of the first ALE year). Transition relief is reported on the 1094-C in Part III.

What Filing Looks Like Once You're an ALE

Each tax year you are an ALE, you file:

One 1094-C transmittal per EIN (or per member EIN if you are an Aggregated ALE)
One 1095-C per full-time employee who was full-time for at least one month of the year — including those who left mid-year
Both transmitted electronically to the IRS by March 31 of the following year
Employee copies of 1095-C furnished by March 3 of the following year (TY2025 deadline; the standard January 31 + automatic 30-day extension)

See 1094-C vs 1095-C for the line-by-line difference. See ACA Filing for how Thomas Ledger handles the whole package.

The Cost of Getting ALE Status Wrong

"I didn't think I was an ALE" is not a defense the IRS recognizes. The §4980H penalties for an ALE that fails to offer coverage are assessed on a per-full-time-employee basis and accrue regardless of whether the employer realized they had crossed the threshold.

For 2026: §4980H(a) is $3,340 per full-time employee per year (across all FT employees minus the first 30), and §4980H(b) is $5,010 per affected employee per year. Those numbers are the IRS-published figures and adjust annually for inflation.

A 60-employee employer that didn't realize they were an ALE and offered no coverage faces a §4980H(a) exposure of (60 − 30) × $3,340 = $100,200 for that year. Filing 1094-C / 1095-C is what creates the IRS audit trail; failing to file at all draws additional §6721 / §6722 penalties on top.