ACA Compliance Checklist for Texas Employers Approaching 50 Employees

Growing past 50 employees is a milestone worth celebrating. It also changes your obligations under the Affordable Care Act. Once you become an Applicable Large Employer (ALE), the employer mandate and annual IRS reporting apply to you, and the penalties for getting them wrong can be significant.

Step 1: Count correctly

ALE status is based on your average number of full-time employees, including full-time equivalents, during the prior calendar year. If you averaged 50 or more, you're an ALE for the current year.

• A full-time employee averages at least 30 hours of service per week, or 130 hours per month.
• Full-time equivalents are calculated by adding the monthly hours of part-time employees (counting no more than 120 hours per person) and dividing by 120.
• Add full-time employees and full-time equivalents for each month, then average the 12 monthly totals.

Step 2: Understand the employer mandate

Once you're an ALE, you may owe a penalty, called an employer shared responsibility payment, if either of the following happens and at least one full-time employee receives a premium tax credit on the marketplace:

• You don't offer minimum essential coverage to at least 95% of your full-time employees and their dependent children up to age 26
• You offer coverage, but it isn't affordable or doesn't provide minimum value

Coverage is considered affordable if the employee's cost for self-only coverage on the lowest-cost plan doesn't exceed a percentage of household income that the IRS sets each year. Because employers don't know household income, the IRS allows safe harbors based on W-2 wages, rate of pay, or the federal poverty line.

Minimum value means the plan covers at least 60% of expected costs and includes substantial coverage for hospital and physician services. Your carrier or plan administrator can confirm this for each plan you offer.

Step 3: Track variable-hour employees

If some employees have hours that vary week to week, you'll need a consistent way to determine whether they're full-time. Many employers use the look-back measurement method, which measures hours over a set period and then locks in each employee's status for a stability period. Setting this up before you reach 50 is far easier than fixing it afterward.

Step 4: Prepare for annual IRS reporting

ALEs must file Forms 1094-C and 1095-C with the IRS each year, reporting the coverage offered to each full-time employee month by month. Employees must also receive their Form 1095-C information. Payroll systems and benefits platforms can automate much of this, but only if the eligibility and offer data are accurate throughout the year.

Your checklist before you cross 50

1. Calculate your monthly full-time and full-time equivalent counts for the current year.
2. Review whether related businesses could be combined for ALE purposes.
3. Confirm that each medical plan you offer meets minimum value.
4. Choose an affordability safe harbor and check your employee contributions against it.
5. Decide how you'll measure variable-hour employees.
6. Confirm that your payroll or benefits platform can produce Forms 1094-C and 1095-C.
7. Document your approach so it holds up if the IRS ever asks.

What about Texas-specific rules?

Texas doesn't add its own employer health coverage mandate on top of the federal ACA rules. Federal requirements still apply, including COBRA continuation coverage once you have 20 or more employees. The ACA employer mandate is a federal obligation that applies the same way in Texas as in every other state.

The bottom line

The 50-employee threshold doesn't require a complete overhaul of your benefits, but it does require planning. If you're in the 40s and growing, the best time to prepare is now, before the requirements apply.

This article is for general educational purposes only and does not constitute legal or tax advice. ACA rules, affordability percentages, penalty amounts, and reporting deadlines are set by the IRS and change periodically. Consult a qualified tax advisor or benefits attorney for guidance specific to your organization.