If your U.S.-based business is expanding and you’re approaching the 50-employee mark, congratulations! Growth is an exciting milestone. And if you’ve long passed the 50 or even 100 EE mark, welcome. However, a larger and growing workforce also comes with new responsibilities, including meeting the requirements of the Affordable Care Act (ACA). 

If your company qualifies as an Applicable Large Employer (ALE), you’ll need to offer health benefits that comply with federal regulations to avoid steep penalties against your business. But where do you start? We’re here to guide you through the process, step by step.

1. Determine if You’re an Applicable Large Employer (ALE)

The first step is confirming whether your business is considered an ALE. Under the ACA, an ALE is any company with 50 or more full-time employees, including full-time equivalents. Employees working at least 30 hours per week or 130 hours per month count as full-time. To calculate your total, combine the hours of part-time and seasonal workers to determine if they equate to full-time equivalent employees. Tools like the ACWise ALE calculator can make this step easier.

If you are a business that relies on gig-workers, seasonal fluctuations in hiring, or part-time workers, this can be confusing. You may not have the same headcount month-to-month, but you’ll need to understand this formula to calculate correctly for year end reporting. 

This may bring up questions around common ownership of different businesses under one entity. If the larger organization is determined to be an ALE then the individual businesses within the group are also subject to ALE standards. Regardless of the total number of employees, these individual businesses will share the responsibility of Employer Shared Responsibility Payment (ESRP) as part of ACA. If you're still not sure if you qualify as an ALE, visit the FAQs: ACA and ALE from SBMA, a leading healthcare provider in the United States for clarification. 

2. Understand ACA Requirements for ALEs

As an ALE, you are required to:

• Offer minimum essential coverage that meets affordability and minimum value standards to at least 95% of your full-time employees and their dependents.
• Ensure that health plans cover essential health benefits, including preventive care, maternity care, and mental health services, without unreasonable exclusions.

So what is affordable coverage and how is it calculated? The ACA bases this calculation on household income and that number changes from year to year. For 2025, contributions cannot exceed 9.02% of the employee's household income, which is a significant increase from the 8.39% in 2024. If you do not have the household income for each employee, it’s assumed only the annual income of the employee will be taken into account. For more detailed information regarding affordability calculations, read here. 

Failing to meet these requirements can result in steep penalties. For 2025, the penalty for not offering coverage is $2,970 per employee annually. If your coverage doesn’t meet affordability or minimum value standards, the penalty rises to $4,460 per employee. These numbers highlight the importance of compliance for your continued business success. 

3. Choose a Health Plan That Works for Your Business

Selecting the right health plan can feel overwhelming, but understanding your options makes it manageable. Consider these approaches:

• Self-funded plans: You pay for your employees’ claims directly. Adding stop-loss insurance helps to cap your risk.
• Level-funded plans: These combine elements of self-funding with predictable monthly payments. Any unused funds may be refunded at the end of the plan year.
• Association health plans (AHPs): By joining other small businesses, you can access large-group pricing and benefits.
• Direct-to-consumer partnerships: Companies like Meridio simplify health benefits with ACA-compliant plans, transparent pricing, and no need for a middleman.

4. Prepare Required Documentation

Compliance also means keeping your paperwork in order. Your hiring and annual healthcare benefits renewal process should be streamlined with the correct forms ahead of reporting time. This means getting to know the Employee Retirement Income Security Act (ERISA) Reporting and Disclosure requirements. 

Make sure to provide employees with the following:

• Summary Plan Description (SPD): An overview of the benefits plan and eligibility, provided within 90 days of the employee enrollment. With Meridio, we make reporting easy by sending time-stamped electronic copies of all required forms to each enrolled individual.
• Summary of Benefits and Coverage (SBC): A detailed explanation of plan benefits and costs. Each employee you enroll in coverage should clearly understand what they are paying for and what you’re offering. Meridio makes this straightforward by providing you the full benefit plan guidebook with plan details. This is also sent to the enrolled individual upon enrollment. 
• Summary Annual Report (SAR): A financial summary of your plan, distributed within nine months after the plan year ends. It is important to note that this requirement does not apply to those exempt from filing form 5500. 

These documents ensure transparency and help employees understand their benefits. Meridio strives to lift the administrative burden by handling most of this administrative paperwork, enrollment, on-going support, and renewal so you can focus on your business at hand. 

5. File Necessary Reports

As an ALE, you’ll need to file reports with the IRS. Understanding when to file is key to avoiding the penalties you’re trying to save from your bottom line. All U.S.-based ALEs must file the appropriate IRS forms for the 2024 tax year no later than February 28th, 2025 or March 31st, 2025.

Here’s a breakdown of a few of the forms you may be required to file:

• Form 5500: Summarizes your health plan’s financial condition. Due seven months after the plan year ends. If your plan year ends June of 2024, Form 5500 would be due January 2025.
• Forms 1094-C and 1095-C: Provide details about the health coverage offered to employees. Employee copies must be distributed by March 3, 2025.

Note there may be more forms required for ALE filing, refer to the Brown and Brown 2024 Employee Benefits Compliance Guide. These filings are essential for proving compliant filings and avoiding penalties. 

6. Conduct Nondiscrimination Testing

The ACA prohibits discrimination in favor of highly compensated employees. Annual nondiscrimination testing for cafeteria plans ensures that benefits are equitably distributed across your workforce. This test is calculated by the aggregate of nontaxable benefits provided to key employees and the nontaxable benefits provided to all remaining employees. Those in the key employee group must not exceed 25% of aggregate nontaxable benefits offered to all employees. Other tests around self-funded plans, FSAs, and term life insurance may be included.

If you’re unsure how to conduct this testing, the Levitt Group has a detailed explanation of requirements and calculations. Otherwise consult with your benefits provider or a compliance expert. 

7. Stay Updated on Regulatory Changes

Regularly review updates from reliable sources like the Department of Labor and IRS to stay informed about changes that may impact your benefits reporting requirements. Healthcare regulations are constantly evolving and the recent changes to two laws have simplified the ACA reporting process for employers, AP managers, and HR admins alike. 

In summary, the Paperwork Reduction Act no longer requires employers to mail every qualified employee their tax forms prior to January 31st. Moving forward the paperwork must be supplied within 30 days of the request. 

The second law passed was the Employer Reporting Act, which involves changes to the taxpayer identification number reporting process, the response timing for Letter 226 which is now 90 days from the date of the ESRP notice, as well as changes to the statute of limitations and electronic delivery. Review the detailed breakdown and checklist for ALEs from McDermott, Will and Emory regarding more on both these laws.

Why Compliance Matters

Compliance isn’t just about avoiding penalties; it’s about supporting your team with meaningful benefits to ensure longevity and a positive work culture. Employees are the backbone of your business, and offering comprehensive health coverage shows you value their well-being. Moreover, competitive benefits help attract and retain top talent, fueling your company’s continued growth.

Partnering with Meridio for Simplified Health Benefits

At Meridio, we understand the challenges of managing employee health benefits. That’s why we’ve designed ACA-compliant plans that are easy to implement, affordable, and flexible. Our plans come with transparent pricing and personalized support to help you navigate compliance with confidence. Whether you’re just starting out or scaling your business as an ALE, Meridio is here to help.

Take the Next Step

Implementing compliant health benefits doesn’t have to be daunting. With a clear process and the right partner, you can support your employees while meeting federal requirements. Ready to simplify your health benefits? Visit Meridio to explore our solutions and get started today.