Determining if an employer is an applicable large employer

Full-time employees and full-time equivalent employees

A full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at leas t 130 hours of service during the calendar month .

A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee. An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

  1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
  2. Divide the total by 120.

An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an ALE. An ALE need not offer minimum essential coverage to its part-time employees to avoid an employer shared responsibility payment. A part-time employee’s receipt of the premium tax credit for purchasing coverage through the Marketplace cannot trigger an employer shared responsibility payment.

The Employer Shared Responsibility Provision Estimator helps employers understand how the provision works and learn how the provision may apply to them. Employers can use the estimator to determine:

Basic ALE determination examples

Example 1 – Employer is not an ALE

Example 2 – Employer is an ALE

Additional examples can be found in section 54-4980H-2 of the ESRP regulations.

Employer aggregation rules

Companies with a common owner or that are otherwise related under certain rules of section 414 of the Internal Revenue Code are generally combined and treated as a single employer for determining ALE status. If the combined number of full-time employees and full-time equivalent employees for the group is large enough to meet the definition of an ALE, then each employer in the group (called an ALE member) is part of an ALE and is subject to the employer shared responsibility provisions, even if separately the employer would not be an ALE.

Example 3 – Employers are aggregated to determine ALE status:

There is an important distinction for employers to keep in mind regarding these aggregation rules. Although employers with a common owner or that are otherwise related generally are combined and treated as a single employer for determining whether an employer is an ALE, potential liability under the employer shared responsibility provisions is determined separately for each ALE member.

Also, a special standard applies to government entity employers in the application of the aggregation rules under section 414. Because section 414 relates to common ownership and ownership isn’t a typical arrangement for government entities, and because specific rules under section 414 of the Code for government entities haven’t yet been developed, government entities may apply a good faith reasonable interpretation of section 414 to determine if they should be aggregated with any other government entities.

Seasonal workers

When determining if an employer is an ALE, the employer must measure its workforce by counting all its employees. However, there is an exception for seasonal workers.

An employer is not considered to have more than 50 full-time employees (including full-time equivalent employees) if both of the following apply:

  1. The employer's workforce exceeds 50 full-time employees (including full-time equivalent employees) for 120 days or fewer during the calendar year, and
  2. The employees in excess of 50 employed during such 120-day period are seasonal workers.

A seasonal worker is generally defined for this purpose as an employee who performs labor or services on a seasonal basis. For example, retail workers employed exclusively during holiday seasons are seasonal workers. For more information about how seasonal workers affect ALE determinations, see our Questions and Answers page. For information on the difference between a seasonal worker and a seasonal employee under the employer shared responsibility provisions see Q&A #26. And for the full definition of seasonal worker, see section 54.4980H-1(a)(39) of the ESRP regulations.

Application to new employers

A new employer (that is, an employer that was not in existence on any business day in the prior calendar year) is an ALE for the current calendar year if it reasonably expects to employ, and actually does employ, an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the current calendar year. See Q&A #7 on our employer shared responsibility questions and answers page for more information.

More information

More information about determining ALE status can be found in our Questions and Answers and Publication 5208 PDF , Affordable Care Act – Are you an applicable large employer? The Department of the Treasury and the IRS have also issued the following legal guidance related to the employer shared responsibility provisions:

More information is also available in this fact sheet PDF issued by the U.S. Department of the Treasury.