For many organizations, understanding whether you’re considered an applicable large employer, or ALE, under the Affordable Care Act (ACA) is the first step toward choosing the right health benefit strategy. But between full-time employee equivalents, Internal Revenue Service (IRS) reporting, and employer mandate requirements, it can be challenging to know what you need to offer to stay compliant.
In this guide, we’ll go over what an ALE is, how to determine your employer status, and how Remodel Health can help you meet regulations without the rising costs of traditional group health plans.
In this blog post, you’ll learn:
An applicable large employer (ALE) is any organization that averaged 50 or more full-time equivalent employees (FTE) during the previous calendar year. This means that you need to offer qualifying health insurance coverage to at least 95% of your full-time employees.
Even if you didn’t maintain 50 employees all year long, your average headcount determines whether you’re considered an ALE for the current year.
If your organization has fewer than 50 FTEs, you don’t meet this employer status. You’re not required to offer health insurance under the federal government’s employer mandate.
Understanding how to calculate FTEs is essential when determining your ALE status.
A full-time employee is someone who averages 30 or more hours of service per week, or 130 hours of service in a calendar month.
FTEs account for your part-time employees. To determine how many FTEs your part-time employees represent, total all part-time hours of service for a calendar month and divide by 120. Then, add the number of full-time employees to get your total FTE count.
You don’t count owners who aren’t W-2 employees in your FTE counts, such as:
Because your workforce can fluctuate, you should perform this FTE calculation annually if you’re near the 50 FTE threshold.
In most situations, you have to count seasonal workers in your FTE calculation.
You can exclude seasonal employees from your FTE calculation if both of the following are true:
The 120 days don’t have to be consecutive. They can occur at any point throughout the year.
Businesses with shared ownership may count as a single employer under ACA standards. In these situations, you must aggregate all entities to determine your total FTEs. This requirement can make ALE calculations more complex, but it ensures you classify your organization accurately.
ALEs are subject to the ACA’s employer shared responsibility provisions, commonly known as the employer mandate.
According to the mandate, ALEs must provide a health insurance plan to at least 95% of their full-time employees and dependents. The plan must offer minimum essential coverage (MEC), meet affordability standards, and deliver minimum value. Failure to comply may lead to a tax penalty.
ALEs may face two types of employer mandate penalties:
In either scenario, tax penalties may apply if at least one employee enrolls in an individual health plan and receives a premium tax credit.
ALEs also have reporting obligations under the ACA. Misfilings can lead to penalties. It’s best to work with a tax professional.
If you’re an ALE, you must complete annual ACA reporting:
Meeting the employer mandate doesn’t mean you have to rely on an expensive, one-size-fits-all group plan. Many ALEs are moving toward personalized solutions that offer affordability and flexibility.
The individual coverage health reimbursement arrangement (ICHRA) is becoming increasingly popular. Among large employers, ICHRA adoption rose by 34% from 2024 to 2025.
An ICHRA helps ALEs meet the employer mandate by providing employees with tax-free allowances they can use to buy their own individual health insurance. Remodel Health’s 2024 ICHRA Report found that the average allowance ALEs offer is $448 per month.
With an ICHRA, employers can:
While traditional group health insurance has been the default option for decades, ICHRA is a modern alternative for ALEs.
The chart below shows how both options compare.
| Feature | ICHRA | Group health plan |
| Cost control | No renewal surprises. Employers set a defined monthly contribution and stick to it for the plan year. | Premiums increase unpredictably year after year. Large group plans are experience-rated, so your employees’ claims impact premiums at renewal. |
| Flexibility | Employees choose individual health plans available in their own ZIP code. | Employers offer one group health plan to all employees. This can be difficult to manage for multi-state employers. |
| Compliance | It can fully satisfy ACA affordability, minimum value, and minimum essential coverage (MEC) standards when structured correctly. Employers must offer an affordable allowance to employees. Then, employees enroll in qualifying plans with MEC and MV. Employers avoid the burden of managing renewals, negotiations, and plan designs each year. | It can meet minimum value and affordability requirements, but affordability may require increasing employer contributions. |
| Employee choice | Employees choose their own individual health plans that work best for them. | Employees get a one-size-fits-all plan. |
| Administrative burden | Much simpler for ALEs when paired with an ICHRA administrator, like Remodel Health. | Requires ongoing management. |
Remodel Health is a leading ICHRA provider for large employers and their broker consultants. We specialize in helping ALEs break free from the rising costs of group health insurance.
Our ICHRA+® administration solution simplifies, streamlines, and strategically enhances modern health benefits. Your employees can conveniently shop for individual health plans straight from their Remodel Health accounts. Plus, our platform integrates with more than 200 payroll and HRIS systems.
With ICHRA+, you get:
It’s important to determine whether you’re an applicable large employer (ALE) and understand what that means for your organization. Between calculating full-time equivalent employees (FTEs), meeting Internal Revenue Service (IRS) reporting requirements, and finding a health benefit that actually works for your team, there’s a lot to manage. But you don’t have to do it alone.
If you’re looking for a more affordable and fully compliant health benefit, Remodel Health is here to help. Schedule a call with a personalized benefits advisor to start offering an ICRHA to your team!