MyCo Glossary · US HR & Payroll

ACA (Affordable Care Act): Employer Mandate Explained

The Affordable Care Act (ACA) is the US health-reform law that, for employers, requires Applicable Large Employers (50+ full-time-equivalent employees) to offer affordable, minimum-value health coverage or face penalties.

Who must comply (the ALE test)

The ACA employer mandate applies to Applicable Large Employers (ALEs) — businesses that employed an average of 50 or more full-time-equivalent (FTE) employees in the prior calendar year.

  • A full-time employee works 30+ hours/week
  • Part-time hours are combined into FTEs
  • Seasonal worker exceptions may apply

What ALEs must offer

ALEs must offer coverage that is both affordable and provides minimum value to at least 95% of full-time employees and their dependents.

  • Affordable: employee's share of self-only premium is at or below the IRS percentage of household income (about 9.0% in 2026)
  • Minimum value: plan pays at least 60% of total allowed costs

ACA reporting: Forms 1095-C and 1094-C

ALEs must report coverage to the IRS and employees each year using Form 1095-C (to employees) and Form 1094-C (transmittal to the IRS). Deadlines fall early in the year following the coverage year.

Penalties

Two penalties apply: the 4980H(a) 'no-offer' penalty (for not offering coverage to 95% of full-timers) and the 4980H(b) 'affordability' penalty (for unaffordable or low-value coverage). Both are triggered when a full-time employee receives a premium tax credit on the marketplace.

Related terms

FLSA →COBRA →ERISA →Exempt vs Non-exempt →

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FAQs about ACA

Who has to comply with the ACA employer mandate?

Applicable Large Employers — those with 50 or more full-time-equivalent employees on average in the prior year. Smaller employers are exempt from the mandate but may still offer coverage.

What is an FTE for ACA?

A full-time-equivalent combines part-time hours into the equivalent of full-time employees (30+ hours/week). Add full-time employees to the FTE total to test the 50-employee threshold.

What are the ACA reporting forms?

ALEs file Form 1095-C for each full-time employee and Form 1094-C as the transmittal to the IRS each year.

How does MyCo help with ACA?

MyCo tracks full-time status and hours, flags when you approach ALE status, and helps generate 1095-C/1094-C data so your reporting is accurate.