As an employer there is a lot on your plate right now. You are navigating your business in the midst of a pandemic, these are unprecedented times.
Although they may be the last thing on your mind, the ACA reporting requirements aren’t being put on pause.
Be sure that you are tracking your employees’ hours on a monthly basis to ensure that they are being offered health insurance coverage if and when they become eligible. Failing to realize your status as an Applicable Large Employer (ALE) and report accordingly is a mistake that can cost your business.
Determining the number of full-time employees and full-time equivalent employees that you have on your payroll is generally where this crucial mistake happens.
How Does The IRS Define an ALE?
The IRS defines an Applicable Large Employer as one having 50 or full-time and/or full-time equivalent employees. These ALEs must offer health insurance to at least 95% of their full-time employees health insurance coverage that meets the standards of quality and affordability required by the Affordable Care Act (ACA).
ALEs provide proof that they are meeting these requirements by reporting their employees’ coverage information to the IRS annually.
What is the Definition of a Full-time Employee?
Under the ACA, a full-time employee is one that works 30 hours per week or a total of 130 hours every month.
What is the Definition of a Full-Time Equivalent?
Full-time equivalent employees are a combination of part-time employees. When the number of hours they work is added up, it equals the hours of a full-time employee.
For example, 2 part-time employees that work 15 hours per week and a combined total of 130 hours per month, together they are the equivalent of a full-time employee.
These part-time employees are not eligible for an offer of health insurance coverage, however they are counted when determining the ALE status of their employer.
What About Seasonal Workers?
Many businesses employ the help of seasonal workers during their busy seasons. These employees do not count towards an employer’s ALE status as long as they were employed for less than 120 days.
Determining ALE Status
This can be tricky, especially as an employer who is new to understanding the many requirements under the ACA. Although, there is no need to worry, our team of experts are here to help you determine your ALE status and offer you flexible solutions if you are a mandated reporter.
To easily determine your ALE status, check out our ALE Status Calculator. This simple and secure tool is just another way that our team helps simplify the ACA compliance process!