If your business is approaching 50 full-time employees, ACA compliance can start to feel a lot more complicated. One area that often causes confusion is ACA minimum value reporting. So what does “minimum value” actually mean? Which employers have to report it? And what happens if your coverage doesn’t meet the ACA’s requirements?
If you’re an employer trying to stay ahead of your ACA obligations, here are five things you need to know about ACA minimum value, affordability, and reporting requirements.
ACA Minimum Value Reporting: The Quick Answer
ACA “minimum value” means a health plan covers at least 60% of expected medical costs. Employers with 50+ full-time employees (Applicable Large Employers, or ALEs) must offer minimum value, affordable coverage — the 2026 affordability limit is 9.96% of household income — and report it annually via Forms 1094-C and 1095-C. Non-compliance can trigger separate penalties of up to $3,340 per employee (4980H(a)) or $5,010 per employee (4980H(b)).
1: Reporting is an ALE Requirement
It’s generally thought that ACA requirements related to “minimum value” and “affordability” apply to small employers. However, the reality is that minimum value reporting is part of employer shared responsibility provisions. Those apply to Applicable Large Employers (ALEs). Whether an employer is an ALE is determined annually by the average size of the employer’s workforce during the prior calendar year.
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to employer shared responsibility provisions. Nor is employer information reporting required for the current year.
If an employer has at least 50 full-time employees, including full-time equivalent employees, during the prior year, the employer is an ALE for the current calendar year. That means it is subject to employer shared responsibility provisions and employer information reporting.
2: How Do You Determine If You’re an Applicable Large Employer (ALE)?
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. Then divide that total number by 12.
A full-time employee for any calendar month is an employee who has, on average, worked at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.
A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.
An employer determines its number of full-time-equivalent employees for a month in two steps:
- 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, and
- Divide the total by 120.
An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an ALE. An ALE need not offer minimum essential coverage to its part-time employees to avoid an employer shared responsibility payment. For more information, visit the IRS website.
3: What Does “Minimum Value” Mean Under the ACA?
Under the ACA, ALEs are required to offer health plans that cover at least 60% of total expected allowed medical costs for covered physician and inpatient hospital services. An employer can confirm compliance through insurance carrier certifications, a checklist, or the official Centers for Medicare & Medicaid Services (CMS) Minimum Value Calculator for self-insured plans.
Documentation of compliance must be reported to the IRS using Forms 1094-C and 1095-C. Reporting is due annually in the first quarter. Accuracy in reporting is critical – apart from the offering of coverage itself.
4. How Much Did the ACA Affordability Threshold Change for 2026?
The IRS affordability percentage increased significantly for 2026 – from 9.02% for 2025 to 9.96% for this year.
For 2026 calendar-year plans, the ACA Federal Poverty Line (FPL) safe harbor caps the maximum monthly employee contribution for the lowest-cost self-only plan at $129.90 for the contiguous U.S. It is higher in Alaska and Hawaii.
Employers can also use the W-2 or rate-of-pay safe harbors instead. For more information, refer to the IRS Q&A on ACA employer shared responsibility provisions.
5. What Are the 2026 Penalties for Non-Compliance?
ALEs face two distinct penalties under the ACA shared responsibility provisions.
Section 4980H(a) assesses a penalty of $3,340 per year ($278.33 per month) per full-time employee (excluding the first 30 workers) for failing to offer qualified coverage to at least 95% of eligible full-time workers and their dependents, if at least one employee receives a subsidized ACA Marketplace tax credit.
Section 4980H(b) assesses a penalty of $5,010 per year ($417.50 per month) when an employer offers unaffordable or insufficient coverage, or if an employee receives an ACA Marketplace subsidy. (Insufficient coverage fails to provide minimum value, as noted above in point three.)
General information reporting penalties could apply for late or incorrect Forms 1094-C and 1095-C.
The good news is you don’t have to figure it all out on your own. Talk with your broker, a benefits advisor, or a tax professional to help you understand your obligations, evaluate your coverage, and make sure you’re prepared for ACA reporting.
