If your business is approaching 50 full-time employees, ACA compliance can start to feel overwhelming. One area that often causes confusion is ACA minimum value reporting. So what does “minimum cost” actually mean? Which employers have to report it? And what 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 the ACA’s minimum cost, affordability, and reporting requirements.
ACA Minimum Value Reporting: Quick Response
ACA “minimum cost” means that the health plan covers at least 60% of expected medical costs. Employers with 50+ full-time employees (applicable large employers, or ALEs) must offer minimum-cost, affordable coverage — the 2026 affordability limit is 9.96% of household income — and report annually via Forms 1094-C and 1095-C. Noncompliance can trigger separate penalties of up to $3,340 per employee (4980H(a)) or $5,010 per employee (4980H(b)).
1: Reporting requires an ALE.
It is generally believed that the ACA’s “minimum cost” and “utilization” requirements apply to small employers. However, the fact remains that minimum value reporting is part of the employer’s shared responsibility provisions. To whom it applies. Applicable large employers (ALEs). Whether an employer is an ALE is determined by Annually From the average size of the employer’s workforce during the preceding calendar year.
If an employer has Less than 50 Full-time employees, including full-time equivalent employees, during the previous year, is the employer. No An ALE for the current calendar year. Therefore, the employer is No Subject to employer’s shared responsibility provisions. Nor is reporting of employer information required for the current year.
If an employer has At least 50 Full-time employees, including full-time equivalent employees, during the previous year, the employer is An ALE for the current calendar year. That is This Employer’s shared responsibility provisions and Reporting of employer information.
2: How do you determine if you are an applicable large employer (ALE)?
To determine its workforce for a year, an employer adds its total number of full-time employees for each month of the previous calendar year to the total number of full-time equivalent employees for each calendar month of the previous calendar year. Then divide this total number by 12.
A full-time employee for any calendar month is an employee who has, on average, 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 collection of employees, each of whom is not individually a full-time employee, but who, in the aggregate, is equivalent to a full-time employee.
An employer determines its number of full-time equivalent employees for a month in two steps:
- Total the number of hours of service of all non-full-time employees for the month but do not add up to more than 120 hours of service per employee, and
- Divide the total by 120.
The employer’s number of full-time equivalent employees (or part-time employees) is only relevant in determining whether an employer is an ALE. ALE is not required to offer minimum essential coverage to its part-time employees to avoid paying employer shared responsibility. 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 the total expected medical costs for covered physician and inpatient hospital services. An employer can verify compliance through an insurance carrier certification, a checklist, or official Centers for Medicare and Medicaid Services (CMS). Minimum Value Calculator For self-insured plans.
Reports must be made to the IRS using compliance documents. Forms 1094-C and 1095-C. Reporting is due annually in the first quarter. Accuracy in reporting is critical – in addition to offering coverage itself.
4. How much did the ACA deductible change for 2026?
The IRS withholding percentage for 2026 increased significantly – from 9.02% for 2025 to 9.96% for this year.
For calendar year 2026 plans, the ACA Federal Poverty Line (FPL) Safe Harbor sets the maximum monthly employee contribution for the lowest-cost self-only plan at $129.90 for the contiguous United States, which is higher in Alaska and Hawaii.
Employers can also use W-2 or rate-of-pay safe harbors instead. For more information, Refer to the IRS Q&A. On the ACA employer shared responsibility provisions.
5. What are the 2026 penalties for non-compliance?
ALEs face two separate penalties under the ACA shared responsibility provisions.
Section 4980H(a) Assesses the penalty at $3,340 per full-time employee (excluding the first 30 workers) per year ($278.33 per month). Fail to offer eligible coverage Up 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 inadequate coverageor if an employee receives an ACA marketplace subsidy. (Inadequate coverage fails to provide minimum value, as discussed in point three above.)
General information reporting penalties can apply for late or incorrect Forms 1094-C and 1095-C.
The good news is that you don’t have to figure it all out on your own. Talk to your broker, benefits advisor, or tax professional to understand your responsibilities, assess your coverage, and make sure you’re prepared for ACA reporting.
