Every aspect of ACA reporting is complicated. Sometimes it can even be difficult to determine whether or not you are required to complete and submit ACA reporting with the IRS. To help employers understand just what it means to be an ALE and how to determine their ALE status.
Let’s start at the beginning, what is an ALE?
Definition of an ALE
These employers are mandated reporters under the ACA. Therefore, they must submit Form 1094-B / Form 1094-C and Form 1095-B / Form 1095-C to the IRS each tax year.
Under the Affordable Care Act (ACA), an ALE is an applicable large employer. The IRS defines an applicable large employer as an employer with 50 or more full-time or full-time equivalent employees.
ACA reporting provides proof to the IRS that the employer is adhering to their ACA requirements.
Who Does The IRS Consider a Full-Time Employee?
The IRS defines a full-time employee as working 30 hours a week and a total of 120 hours per month.
A full-time employee must be made an offer of affordable health insurance coverage within 90 days of their hire date.
Who Does The IRS Consider A Full-Time Equivalent Employee?
A full-time equivalent is an employee who works less than 30 hours a week. Separately these employees are not full-time, however, collectively they work as many hours as one full-time employee or more.
Do ALEs need to offer their employees health insurance coverage?
Yes, The IRS mandates that all ALEs offer their full-time employees health insurance coverage that fits the affordability and quality requirements laid out in the Affordable Care Act (ACA).
Determining if the health insurance coverage is adequate
As mentioned above, employers must not only offer their eligible employees coverage, but the coverage must meet the standards set in place by the Affordable Care Act. In order to be deemed adequate, the health insurance coverage must provide the full-time and full-time equivalent employees with Minimum Essential Coverage (MEC). This means that the plan must include the 10 essential benefits laid out under the ACA.
Determining if the health insurance coverage is affordable
In addition to offering your employees quality coverage, it must also be affordable in relation to their wages. It must meet the minimum value set in place by the ACA. As of 2020, the IRS deems plans affordable if the cost for the employee is 9.78% of their annual household income.
Not sure if the coverage you offer your employees meets the ACA affordability requirements? Check out our free ACA Affordability Calculator!
How can I determine my ALE status?
As you can see, determining your ALE status may not be as straightforward as it may appear initially. Don’t worry, the experts at ACAwise created a free tool to help you!