The Affordable Care Act generates more compliance anxiety in the 5–50 employee range than in any other business size category. Businesses with fewer than 50 full-time equivalent employees hear about ACA requirements from headlines and from peers who seem perpetually concerned about compliance — and they're not sure which rules apply to them and which don't. The result is often a mix of over-compliance (spending money on requirements that don't apply) and actual gaps (missing things that do apply).
Here's the plain-English version of what the ACA requires — and doesn't require — for businesses in North Dakota and Minnesota with 5–50 employees.
The Central Threshold: 50 Full-Time Equivalents
The ACA created the category of Applicable Large Employer (ALE) to define which businesses have the most significant compliance obligations. An ALE is a business with 50 or more full-time equivalent employees in the prior calendar year.
If you have 50 or more FTEs, you're an ALE and you're subject to the employer mandate — which requires you to offer minimum essential coverage that meets affordability and minimum value standards to your full-time employees, or face potential penalties.
If you have fewer than 50 FTEs, you are not an ALE, and you are not subject to the employer mandate. This is the single most important thing for business owners in the 5–50 range to understand: the ACA does not require you to offer health insurance if you have fewer than 50 FTEs. The mandate applies to large employers, not small ones.
How to Count FTEs Accurately
"Full-time equivalent" is not simply a count of your employees. The ACA uses a specific calculation that aggregates part-time hours:
- Full-time employees: Anyone working 30 or more hours per week on average. Count each as 1.0 FTE.
- Part-time employees: Add up all monthly hours worked by part-time employees (those working fewer than 30 hours per week) and divide by 120. The result is your part-time FTE contribution.
- Total FTEs: Full-time count + part-time FTE calculation.
Example: You have 30 full-time employees and 40 part-time employees working an average of 20 hours per week. Part-time FTEs = (40 × 20 × 52/12) / 120 = approximately 28.9 FTEs. Total FTEs = 30 + 28.9 = 58.9 — above the ALE threshold.
Businesses that think they have 40 employees but haven't done this calculation may be above 50 FTEs without realizing it. Conversely, businesses with many part-time workers may have 60 W-2 employees but fewer than 50 FTEs under the ACA calculation.
What Non-ALEs (Under 50 FTEs) Must and Must Not Do
This is where a lot of the confusion lives. If you're under 50 FTEs, here's the precise breakdown:
You must do:
- Nothing that the ACA specifically requires of large employers. The mandate doesn't apply to you.
- If you choose to offer health insurance, the plans you offer must still comply with ACA market rules for small group coverage — essential health benefits, coverage of dependents to age 26, prohibition on lifetime and annual dollar limits.
- Comply with COBRA (if you have 20+ employees) or state continuation requirements (in Minnesota, MN-COBRA applies to employers with 2–19 employees).
You don't have to do:
- Offer health insurance at all. This is a voluntary decision for non-ALEs.
- Offer coverage to part-time employees (even if you choose to offer coverage to full-time employees).
- File ACA reporting forms 1094-C and 1095-C — those are ALE requirements. Non-ALEs do file 1094-B/1095-B if they're self-insured, but that's a narrower requirement.
What many non-ALEs choose to do anyway (and why):
- Offer health insurance to attract and retain employees, even without a legal mandate
- Extend coverage to eligible dependents to age 26 (ACA rules still apply to any coverage offered)
- Access SHOP Marketplace options if they want to compare small group plans through the federal or state exchange
What ALEs (50+ FTEs) Must Do
If you've crossed the 50 FTE threshold — even if only temporarily during the prior calendar year — you become an ALE for the following year. ALE obligations include:
Offer minimum essential coverage to full-time employees and their dependents: You must offer health insurance to full-time employees (30+ hours/week). The coverage must meet "minimum value" (pay at least 60% of covered expenses) and "affordability" standards (employee premium for single coverage can't exceed a set percentage of household income — 9.02% in 2025).
ACA reporting: File 1094-C and 1095-C forms annually with the IRS and provide 1095-C statements to employees. These forms document that you offered coverage, what coverage was offered, and who accepted.
Employer Shared Responsibility Payments (ESRP): If you fail to offer qualifying coverage and any full-time employee receives a subsidy through the marketplace, you face potential penalties. In 2025, the penalty for not offering coverage at all is approximately $2,900 per full-time employee (above the first 30). For offering inadequate or unaffordable coverage, the penalty is approximately $4,350 per affected employee who receives a marketplace subsidy.
Growing Toward 50 Employees: Staying Ahead of the Threshold
The ACA creates a specific planning challenge for businesses approaching the 50 FTE mark. If you're at 35–45 FTEs and growing, the transition to ALE status deserves proactive attention — not a scramble after you've already crossed the line.
Practical steps as you approach 50 FTEs:
Calculate your FTE count quarterly, not annually: Your ALE status for a given year is determined by your prior-year FTE average. If you cross 50 in mid-year, you become an ALE for the following year. Knowing where you stand allows time to prepare.
Establish a benefits offering before you're required to: Businesses that implement group health before crossing the ALE threshold build the internal processes, carrier relationships, and employee expectations that make ALE compliance less disruptive. Scrambling to implement group health immediately after crossing 50 FTEs is operationally harder and more expensive.
Understand the affordability calculation: Once you're an ALE, you need to ensure that the employee contribution for single coverage doesn't exceed the ACA affordability safe harbor threshold. If wages vary significantly across your workforce, this calculation may require adjustments to how you structure employee contributions.
Set up your reporting systems: The 1094-C/1095-C reporting requirement is the most administratively demanding ACA obligation for ALEs. Payroll systems like ADP, Paychex, and Gusto handle much of this automatically — but only if they're configured correctly and have accurate coverage data throughout the year.
To talk through where your business stands on ACA compliance and how it connects to your benefits strategy, visit /employee-benefits or schedule a conversation with Kain Carlson.
Kain Carlson is an independent insurance advisor based in Fargo, ND, licensed in North Dakota and Minnesota. He works with owner-operated businesses across all three coverage pillars — commercial, benefits, and personal — under one advisory relationship. Schedule a review to see where your coverage stands.