The 50 FTE Threshold
An employer is an Applicable Large Employer (ALE) under the ACA if it employed an average of at least 50 full-time equivalent employees (FTEs) on business days during the preceding calendar year. ALE status is determined annually — an employer that was an ALE in 2025 must determine whether it is an ALE for 2026 based on its 2025 workforce.
| Employee Type | How Counted | Notes |
|---|---|---|
| Full-time employee | 1.0 FTE | Works 30+ hours/week or 130+ hours/month |
| Part-time employee | Fractional FTE | Monthly hours ÷ 120 = FTE contribution |
| Seasonal employee | May be excluded | Seasonal worker exception if workforce exceeds 50 FTEs for fewer than 120 days due to seasonal workers |
| Leased employees | May be counted | Depends on common law employer analysis |
Controlled Group Rules
Related employers under common ownership or control are aggregated for ALE determination. This means a parent company and its subsidiaries, or a group of companies under common control, are treated as a single employer for ALE purposes. An employer that has fewer than 50 FTEs on its own may still be an ALE if it is part of a controlled group that exceeds 50 FTEs in total.
Watch Out
Controlled group analysis is complex and fact-specific. Common ownership thresholds, attribution rules, and the distinction between parent-subsidiary and brother-sister controlled groups require careful analysis. If your organization has related entities, engage ERISA or tax counsel to confirm your controlled group analysis before determining ALE status.
Practical ALE Calculation
- 1Count full-time employees (30+ hours/week) for each month of the prior year
- 2For each month, calculate part-time FTEs: total part-time hours ÷ 120
- 3Add full-time employees + part-time FTEs for each month
- 4Sum the 12 monthly totals and divide by 12
- 5If the result is 50 or more, you are an ALE for the current year