Are you an Applicable Large Employer (ALE)?
The Affordable Care Act (ACA) requires “applicable large employers” to offer health coverage to at least 95% of full-time employees and their children (as defined by the ACA) or potentially pay a tax penalty. In addition, the ACA reporting requirement under Code Section 6056 requires ALEs to submit annual reports to the IRS and written statements to employees that include data about medical plans offered, the cost of coverage and enrollment.
Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):
The employer shared responsibility provisions; and the employer information reporting requirements for offers of minimum essential coverage. Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.
- If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting requirements for the current year. Employers who are not ALEs may be eligible for the Small Business Health Care Tax Credit and can find more information about how the Affordable Care Act affects them on the ACA Tax Provisions for Small Employers page.
- If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year. It is therefore subject to the employer shared responsibility provisions and the employer information reporting requirements.
The Affordable Care Act (ACA) requires “applicable large employers” (ALEs) to offer health coverage to at least 95% of full-time employees and their children (as defined by the ACA) or possibly pay a tax fine. Also, the ACA reporting requirement under Code Section 6056 requires ALEs to submit annual reports to the IRS and written statements to employees that include information about medical plans offered, the price of coverage, and enrollment.
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An employer determines if it is an ALE for a current calendar year based on its number of full-time employees (including full-time equivalent employees) during the prior calendar year. If an employer hires additional employees, including some part-time employees, during the current calendar year, the employer will take those employees into account when determining if it is an ALE for the next calendar year.
Yes. Employers that are subject to the employer shared responsibility provisions (that is, ALEs) are required to report information about whether they offered coverage to employees and if so, information about the offer of coverage. ALEs are required to send this information to the IRS on Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. ALEs are also required to send the Form 1095-C for each employee to that employee. The information on these forms is used to determine whether an ALE owes a payment under the employer shared responsibility provisions and whether employees are eligible for the premium tax credit. For additional information, see the section 6056 final regulations, the Instructions for Forms 1094-C and 1095-C, the Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C, and the IRS Q&A page for offers of health insurance coverage by employers (Section 6056).
Also, an employer that sponsors self-insured health coverage – whether or not the employer is an ALE – has information reporting responsibilities as a provider of minimum essential coverage. In general, an ALE that sponsors self-insured health coverage will use the same form it uses to report about offers of coverage (Form 1095-C) to satisfy this requirement by filling out an additional section (Part III) for employees and family members who enroll in the coverage. See the Instructions for Forms 1094-C and 1095-C. For additional information, including for employers that are not ALEs but that sponsor self-insured health coverage, see the section 6055 final regulations, the Instructions for Forms 1094-B and 1095-B, and the IRS Q&A page for information reporting by coverage providers (Section 6055).
Generally, an hour of service means each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer, and each hour for which an employee is paid, or entitled to payment, 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.
For more information on the interaction of the rules relating to the hour of service definition in the employer shared responsibility provisions with the definition in the Department of Labor regulations, which is incorporated into the section 4980H regulations, see Notice 2015-87 (question 14).
A plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan and provides substantial coverage of inpatient hospitalization services and physician services. On May 3, 2013, Treasury and the IRS issued proposed regulations regarding how to determine minimum value and on September 1, 2015, Treasury and IRS issued proposed regulations on the requirement to provide substantial coverage of inpatient hospitalization and physician services.
The premium tax credit generally is available to help pay for coverage for individuals who
- have household income of at least 100 percent but not more than 400 percent of the federal poverty line and enroll in coverage through a Marketplace,
- are not eligible for coverage through a government-sponsored program like Medicaid or CHIP, and
- are not eligible for coverage offered by an employer or are eligible only for employer coverage that is unaffordable or that does not provide minimum value.