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Free Practitioner Reference · 2026 Edition

ACA ALE Determination
& Compliance Guide

The IRS uses your ALE determination against you in a Letter 226-J. This guide ensures yours is airtight — covering the full monthly FT+FTE methodology, controlled group aggregation, seasonal workers, and variable-hour look-back.

What’s Inside — 9 Sections
Core ALE determination methodology
Monthly FTE formula and 120-hour cap
Annual averaging and rounding rules with worked example
Controlled groups under IRC § 414(b)(c)(m)(o)
Seasonal worker exception — two worked examples
Variable-hour employee identification
Look-back measurement method structure
Five compliance checklists
Three printable calculation worksheets
Free — no credit card
Instant access
2026 Indexed Figures
IRC § 4980H sourced
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Received a Letter 226-J? Download the companion 226-J Response Guide.

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50+
FT + FTE employees — the ALE threshold that triggers all § 4980H obligations
§ 414
The IRC section aggregating controlled groups — the most commonly missed ALE trap
120 Days
The seasonal worker exception window — exceeded by even one day and the exception fails
What’s Inside

Full Table of Contents

  • 1

    Core ALE Determination Methodology

    Monthly FT count, FTE formula, annual averaging, rounding rules, and a full worked example.

  • 2

    Controlled Groups & Aggregated ALE

    § 414 aggregation, member-by-member ESRP liability, 1094-C Part IV fields.

  • 3

    Seasonal Workers vs. Seasonal Employees

    The critical distinction between the ALE exception and the look-back classification.

  • 4

    Variable-Hour & Full-Time Identification

    30/130 standard, monthly and look-back methods, hours of service rules.

  • 5

    Forms 1094-C / 1095-C Reporting Framework

    Filing deadlines, e-file threshold, alternative furnishing under Notice 2025-15.

  • 6

    Common Pitfalls & Controls

    Ten-row table covering the most commonly missed ALE determination errors.

  • 7

    Compliance Checklists

    Pre-year determination, monthly data, controlled group governance, notice readiness.

  • 8

    Calculation Templates

    Monthly worksheet, annual averaging worksheet, controlled group consolidation.

  • 9

    Authoritative Sources

    11 cited IRS sources with live links.

Companion resource

Received a Letter 226-J? The 226-J Response Guide covers the full dispute process.

Who This Is For

Built for Practitioners

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HR and Benefits Directors

Document your ALE determination process and defend it against IRS challenge.

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Finance and Tax Teams

Model ESRP exposure from ALE determination errors and understand § 414 aggregation.

⚖️

ERISA and Tax Counsel

Reference the regulatory framework with practitioner notes on common pitfalls.

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Payroll and HRIS Teams

Understand how hours of service are counted and how the look-back method works.

Disclaimer. This guide is informational only and does not constitute legal, tax, or accounting advice. Verify all figures against current IRS publications before relying on them in a filing or controversy posture. Consult qualified ERISA, tax, and benefits counsel. PenaltyShield is not a law firm.

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