Compliance Check: Becoming an Applicable Large Employer

Written by benefitexpress | September 27, 2017

As a benefits pro, you're an invaluable resource for your employees and clients. But what do you do when even you don't have the answers? Call in the compliance expert at benefitexpress, Larry Grudzien, for a Compliance Check.

Question: My employer will become an Applicable Large Employer (ALE) in 2017 and will be subject to the employer mandate for the first time in 2018.  When will the employer be required to offer health coverage to full-time employees in 2018?

The short answer: April 1, 2018 

In Treasury Regulations Section 54.4980H-2(b)(5), the IRS provides that an employee who was not offered coverage at any point in the prior calendar year, that if the Applicable Large Employer (ALE) offers coverage on or before April 1 of the first year in which the employer is an ALE, the employer will not be subject to a penalty (for January through March of the first year the employer is an ALE) under Code Section 4980H(a) by reason of its failure to offer coverage to the employee for January through March of that year, and the employer will not be subject to a penalty (for January through March of the first year the employer is an applicable large employer) under Code Section 4980H(b) if the coverage offered provides minimum value.

However, if the employer does not offer coverage to the employee by April 1, the employer may be subject to the Code § 4980H(a) penalty for those initial calendar months in addition to any subsequent calendar months for which coverage is not offered, and if the employer offers coverage by April 1 but the coverage does not provide minimum value, the employer may be subject to the Code § 4980H(b) penalty for those initial calendar months (in addition to any subsequent calendar months for which coverage does not provide minimum value or is not affordable). This rule applies only during the first year for which an employer is an ALE-even if the employer falls below the 50 full-time employee (plus full-time equivalent employee) threshold for a subsequent year and then expands and becomes an ALE again, as provided in Treasury Regulations Section 54.4980H-2(b)(5).


Lawrence (Larry) Grudzien, JD, LLM is an attorney practicing exclusively in the field of employee benefits. He has experience in dealing with qualified plans, health and welfare, fringe benefits, and executive compensation areas. He has more than 35 years' experience in employee benefit law. He can be found on his website, or email him at larry@larrygrudzien.com.

Topics: Affordable Care Act, HIPAA