When it comes to Affordable Care Act (ACA) compliance, one of the biggest mistakes companies make is assuming they’re too small to be subject to the employer mandate. On paper, your business may have fewer than 50 full-time employees. But here’s the catch: if you share ownership with other companies, you could be part of a “controlled group” that pushes you over the threshold—making you an Applicable Large Employer (ALE) without realizing it.
The Question Every Business Should Ask: “Could we be an ALE because of common ownership?”
The ACA doesn’t just look at each company individually. Instead, it requires employers to apply IRS controlled group rules when determining ALE status. That means if you and other companies are connected through common ownership, you may have to count employees across the entire group.
For example:
- Company A has 30 full-time employees.
- Company B, under common ownership, has 25.
- Together, they make 55 full-time employees.
Even though neither company individually has 50 employees, both are treated as ALEs and must comply with ACA requirements.
Why This Matters:
If you’re unexpectedly an ALE, you take on significant responsibilities under the ACA’s employer mandate:
- Each company in the group must offer affordable, minimum essential coverage to full-time employees.
- Each company must file Forms 1094-C and 1095-C with the IRS every year.
- Penalties apply on a per-entity basis if any company fails to comply.
In short: You can’t rely on your headcount alone to determine if you’re exempt.
The Hidden Risks for Certain Ownership Structures:
Some companies are more at risk of accidentally falling into ALE status because of how ownership is structured:
- Family-Owned Businesses – Multiple companies owned by the same individuals may be grouped together.
- Holding Companies – If one entity owns stakes in several subsidiaries, employees across all may need to be counted.
- Shared Services Arrangements – Centralized HR or payroll can create confusion about who’s responsible for compliance.
Special Risk for Private Equity & Venture Capital:
For private equity (PE) and venture capital (VC) firms, there are multiple considerations. Overlooking controlled group rules during due diligence or ongoing compliance isn’t just a headache—it’s a potential liability.
What To Do If You’re Unsure:
If you’re asking yourself whether your business might unknowingly be an ALE, here are steps to take:
- Review Ownership Structures – Work with legal and tax advisors to confirm if you’re in a controlled group.
- Aggregate Headcounts – Track monthly full-time and part-time employees across all entities.
- Confirm Reporting Requirements – Ensure each company knows its responsibility for 1094-C/1095-C filings.
- Keep Documentation – Be ready to show the IRS how you determined ALE status.
- Engage Advisors Early – Proactive analysis avoids costly penalties later.
Final Thought:
The ACA’s employer mandate isn’t just about how many employees you have—it’s about how many employees your ownership group has. Companies that ignore controlled group rules risk becoming ALEs without realizing it—and that’s where penalties start to pile up.
If you’re not sure where your company stands, it’s worth asking the question now before the IRS does. Reach out to our Compliance Team at Silberman Group to help determine answers to these very important questions.
