Counting employees It’s important for business owners to know how many full-time employees they have because two provisions of the Affordable Care Act – employer shared responsibility and employer information reporting for offers of minimum essential coverage – apply only to applicable large employers (“ALE”). Employers average the number of their full-time employees, including full-time equivalents, for the months from the previous year to see whether they are considered an applicable large employer.
Whether an organization is an ALE for a particular calendar year depends on the size of the workforce in the preceding calendar year. To be an ALE, an employer must have had an average of at least 50 full-time employees – including full-time-equivalent (“FTE”) employees – during the preceding calendar year. So, for example, a business will use information about the size of its workforce during 2016 to determine if it is an ALE for 2017.
- A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a 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 aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size.
There are many additional rules on determining who is a full-time employee, including what counts as hours of service.
Responsibilities of small employers and ALEs. The size and structure of the organization’s workforce helps determine which parts of the health care law are applicable. Work forces typically fluctuate, so it’s important to annually determine the size of the workforce.
Fewer than 50 employees:
- Information reporting All employers, regardless of size, that provide self-insured health coverage must file information returns with the IRS about individuals they cover and furnish a statement to employees about the coverage provided. If health coverage is provided through an insurance policy, the issuer files the return and furnishes the statement.
- Payments Employers with fewer than 50 full-time employees, including FTEs, are not subject to the employer shared responsibility provisions.
- SHOP eligibility Employers can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.
- Credits Employers may be eligible for the small business health care tax credit if they do all of the following: (1) cover at least 50 percent of employees’ premium costs, (2) have fewer than 25 FTEs with average annual wages of less than $52,000 in tax years 2015 and 2016, (3) purchase their coverage through the SHOP Marketplace.
50 or More Employees (ALEs):
- Information reporting ALEs must file information returns with the IRS about the coverage they offered and furnish a statement to employees about the health coverage offered. If applicable large employers provide self-insured coverage, the employer also includes information about covered individuals on the information return. ALEs that file 250 or more information returns during the calendar year, must file electronically.
- Payments ALEs are subject to the employer shared responsibility provisions, although transition relief is available for certain employers for 2015 and 2016. In general, ALEs are subject to a payment if the employer does not offer affordable coverage that provides minimum value to its full-time employees and their dependents and at least one full-time employee gets a premium tax credit.
- SHOP eligibility Employers with 50 or fewer employees, including FTEs, in 2016 can purchase insurance through the SHOP Marketplace. Starting in 2016, some states have made the SHOP Marketplace available to businesses with up to 100 employees.