Here's a question we get a lot: “Do I legally have to offer this?”
Typically, no, not until your business averages 50 or more full-time equivalent employees. But that word, equivalent, is where most companies get tripped up.
What “Full-Time Equivalent” Actually Means
You don't need 50 full-time employees to hit the threshold. Full-time equivalent counting means your part-time hours count too. Say you've got 40 full-time employees and 20 part-timers. Depending on their hours, those 20 part-timers could add up to the equivalent of another 10 full-time people, putting you at 50 FTEs even though you'd swear you only have 40 people on staff.
The federal formula: 30 hours a week or 130 hours a month counts as full-time. For part-timers, you add up their monthly hours and divide by 120 to get your FTE count.
Why Companies Cross The Line Without Realizing It
This catches companies with seasonal or variable workers more than anyone. You do the calculation early in the year, and maybe you've got 20 full-time workers and 40 part-timers who aren't logging a lot of hours. Then business picks up, you start giving those part-timers more hours, and suddenly you're over the 50 FTE threshold without ever having “hired” your way there. That number needs to get recalculated regularly, not just once a year.
What It Actually Costs To Get This Wrong
Once you're at 50+ FTEs, the ACA requires you to offer minimum essential coverage that's affordable, or you're exposed to penalties. There are two versions:
The 4980H(a) penalty applies if you don't offer coverage to enough full-time employees at all, and even one employee gets a subsidized plan on the marketplace. This one runs $3,340 per full-time employee (minus the first 30), for the whole company, whether or not most of your employees would have wanted the coverage.
The 4980H(b) penalty applies if you do offer coverage, but it isn't affordable or doesn't meet minimum value, and an employee gets subsidized marketplace coverage instead. This one runs $5,010 per employee who receives that subsidy.
That affordability number matters too. For 2026, a plan is only considered affordable if the employee's cost for the lowest-tier plan doesn't exceed 9.96% of their gross income. Miss that on your lower-wage employees, and you're exposed to the 4980H(b) penalty even if you technically “offered” coverage.
What Planning Ahead Actually Looks Like
Most companies that plan well don't wait until they hit 50. We usually see groups start looking at benefits around 10, 15, or 20 employees. If a company waits longer than that, it's usually because they're in a competitive, low-wage, part-time-heavy industry.
At that stage, we've got options. A simple Blue Cross PPO and HMO combination if affordability allows it, or a MEC plan, minimum essential coverage, which is a lighter-weight way to stay compliant. MEC plans typically run 20 to 30 dollars per employee per month, an affordable way to check the compliance box while you build toward a fuller plan.
A Client Who Crossed 50, And What Caught Them Off Guard
We had a client cross the 50 FTE threshold, and the surprise wasn't the count. It was affordability. Once they were over the line, they had lower-wage employees on staff, and the lowest-tier plan had to come in at or under that affordability percentage relative to gross income. That's a different math problem than just “do we offer a plan,” and it's the one that catches people off guard.
If You're At 45 To 48 Employees Right Now
Here's what to do this month: have the conversation. Get an exact count, full-time and part-time, and run the FTE math. Then shop rates, even if a full medical plan isn't in the budget yet. At minimum, a MEC plan gets you out of compliance hot water fast, and it's affordable, typically 20 to 30 dollars a month per employee.
Not sure where your FTE count actually lands? Call McIlroy Insurance Group at 1-303-681-7785 or email info@migbenefits.com, and we'll run the numbers with you.
