Toast Payroll: Determine Applicable Large Employer (ALE) Status

In this Article:

• Determine Applicable Large Employer Status
• Resources and Reports
  • Determine Large Employer Status Report
  • Additional Toast Payroll Reports
  • Employer Shared Responsibility Provision Estimator
• Applicable Large Employer FAQ

Determine Applicable Large Employer Status

The IRS defines an applicable large employer (ALE) as an employer who has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year. An ALE may be subject to applicable provisions under the Affordable Care Act, including requirements to submit certain year-end documents, such as Form 1095-C, to the IRS. An employer's ALE status is determined each calendar year and generally depends on the average size of an employer's workforce during the prior year.

To determine its workforce size for a year, an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12. The IRS has provided examples of how employers can determine their ALE status.

• Full-Time Employees: The IRS states that a full-time employee is one who is employed for an average of at least 30 hours of service per week, or 130 hours of service per month, in a calendar month.
• Full-Time Equivalent Employees: Full-time equivalent employees are counted by combining the hours of part-time employees, each of whom individually is not a full-time employee, but who in combination count as one or more full-time employees.
  • The IRS specifies that the calculation of full-time equivalent employees is for purposes of the employer shared responsibility provisions and only relevant for purposes of determining whether an employer is an ALE.

Determine the number of full-time-equivalent employees for a month:

1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee.
2. Divide the total by 120. See more from the IRS.

Additional information from the IRS regarding full-time equivalent employees can be found here.

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Resources and Reports

Determine Large Employer Status Report

If you have been utilizing Toast Payroll since January 1st of the applicable filing year, you can run the Determine Large Employer Status report to help assist with calculating full-time and full-time equivalent employees. 
 

To access the report, follow the following steps:

1. Navigate to Benefits > View and manage health benefits > ACA Reporting.
2. Run the Determine Large Employer Status report.
3. Under Customer FEIN select the option for All FEIN's.
   1. This report displays data by common company ownership instead of FEIN.
4. Under Lookback Year, select the previous year.
   1. The report generates data based on the prior calendar year.
5. To review the number of employees for the entire year, select December.
6. Finally, select 12 under Number of Months to get a list of employees from January through December.
7. Once all fields are populated, you will then be able to select an option to Analyze Large Employer Status. The report will then display a month-by-month breakdown of possible full-time and full-time equivalent employees. 

Important Note: Toast Payroll system automatically generates this analysis based on the data you have provided and as a helpful tool to assist you in making the determination as to whether you are an ALE. This tool is not intended to provide professional advice or guidance regarding your financial and tax obligations. This analysis should not be utilized by any employer as the sole means of determining whether an employer is or is not an ALE. If you have questions as to whether you qualify as an ALE, please contact a licensed professional for assistance.

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Additional Toast Payroll Reports

Toast Payroll also provides two additional reports to assist you in furthering full-time employee determinations:

• The Audit by Employee report provides you with a breakdown by employees as to who may possibly qualify as full-time or full-time equivalent employees. 
• The Audit by Earnings report provides you with a breakdown of all hours that were automatically generated for possibly full-time and full-time equivalent employees.

The IRS provides additional information regarding what constitutes an employee's hour of service. Contact a licensed professional for assistance if you have specific questions as to the hours of service for your employees.

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Employer Shared Responsibility Provision Estimator

Take advantage of the Employer Shared Responsibility Provision (ESRP) Estimator to help assist you in calculating your full-time and full-time equivalent employees. The IRS provides this estimator to help employers determine:

• The number of full-time employees, including full-time equivalent employees,
• Whether an employer might be an applicable large employer, and
• For employers that are an applicable large employer, an estimate of the maximum amount of the potential liability for the employer shared responsibility payment that could apply, based on the number of full-time employees reported if an employer fails to offer coverage to its full-time employees.

Note: Estimates depend upon the information you enter into the system; therefore, the IRS cannot validate specific payment amounts. 

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Applicable Large Employer FAQ

What if I was not in business during the preceding year?

The IRS states that an employer who was not in existence on any business day in the prior calendar year is considered to be an ALE in the current calendar year if the employer is reasonably expected to employ, and actually does employ, an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the current calendar year.

What if I have seasonal employees? Is a seasonal employee the same as a seasonal worker under these rules?

The IRS states that the terms "seasonal employee" and "seasonal worker" have different but overlapping meanings for purposes of the employer shared responsibility provisions. 

• • The term seasonal employee is relevant for determining whether an employee is a full-time employee under the look-back measurement method. 
  • The term seasonal worker is relevant for determining whether an employer is an ALE subject to the employer shared responsibility provisions.
  • See IRS guidance for additional details, or contact a licensed professional for more information.

Are there information reporting requirements related to the employer shared responsibility provisions?

For which employees is an ALE not required to file or furnish a Form 1095-C?

In 2025, In 2025, the Paperwork Burden Reduction Act (PBRA) modified the ACA. Visit Toast Payroll: Paperwork Burden Reduction Act to see if your eligible and how you can avoid distributing these forms.

Outside of the PBRA, Form 1095-C is not required for the following employees (unless the employee or the employee’s family member was enrolled in a self-insured plan sponsored by an ALE Member):

• • An employee who was not a full-time employee in any month of the year; or
  • An employee who was in a limited non-assessment period for all 12 months of the year (for example, a new variable hour employee still in an initial measurement period). IRS FAQ: Question 3

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This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.