Determine your ALE status, check affordability requirements, and estimate potential penalties under the Affordable Care Act
FTE Calculation: Full-time employees (30+ hrs/week) count as 1 FTE each. Part-time employee FTEs are calculated by dividing total monthly part-time hours by 120. Formula: FTEs = Full-Time Count + (Part-Time Count x Avg Weekly Hours x 4.33) / 120.
ALE Determination: An employer is an ALE if it had an average of 50+ FTEs during the prior calendar year. The seasonal worker exception applies if you exceed 50 FTEs for 120 days or fewer and the excess is from seasonal workers.
Affordability Test: Using the W-2 Box 1 safe harbor method, employee self-only coverage is affordable if the required monthly contribution does not exceed 9.02% of the employee's W-2 Box 1 wages divided by 12. The 9.02% threshold is indexed annually (IRS Notice 2024-35 / Rev. Proc. 2024-35).
Minimum Value: A plan provides minimum value if it covers at least 60% of the total allowed cost of benefits expected to be incurred. Verified using the HHS MV Calculator or plan design safe harbors.
Penalty A — 4980H(a): $2,970 per year per full-time employee (minus the first 30) if the employer fails to offer MEC to at least 95% of full-time employees. Triggered only when at least one full-time employee receives a premium tax credit.
Penalty B — 4980H(b): $4,460 per year for each full-time employee who receives a premium tax credit because the coverage offered was not affordable or did not meet minimum value. Capped at the Penalty A amount.
Sources: ACA Section 4980H, IRS Notice 2024-35, IRS Rev. Proc. 2024-35, IRS Final Regulations (79 FR 8544), DOL ACA FAQ, HHS MV Calculator methodology.
A benefits advisor can review your specific situation and help you avoid costly ACA penalties.
This compliance assessment implements the full IRS Section 4980H framework including the controlled group aggregation rules, FTE calculation methodology using both the monthly measurement method and look-back measurement method, and all three safe harbor affordability tests (W-2, Rate of Pay, and Federal Poverty Level). Penalty calculations reflect current IRS adjustment factors for inflation.
The Minimum Value determination uses the CMS Minimum Value Calculator methodology, which evaluates whether a plan covers at least 60% of total allowed costs for a standard population. The affordability threshold is tested against the employee's required contribution for self-only coverage relative to the applicable income measure under each safe harbor.
For employers near the 50 FTE threshold, seasonal worker and common ownership aggregation rules create complexity that this tool addresses directionally. A definitive ALE determination should involve analysis of monthly employee counts over the full prior measurement period, which we can provide through our consulting engagement.
This analysis draws from the following primary data sources:
Methodology note: All projections use a composite rate approach with demographic adjustment factors. State-specific regulatory constraints are reflected in baseline rate assumptions. Results are directional estimates intended for planning purposes.