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If you’re an applicable large employer (ALE) with 50 or more full-time or full-time equivalent employees, you’re responsible for reporting health insurance coverage to employees and the IRS through the 1095-C (and 1094-C transmittal), beginning in 2016.
Are you an ALE? Since this is the first step in complying with the Employer Shared Responsibility provision under the ACA, it’s important to understand if you qualify.
First things first: reviewing the hours of service for your workforce. Hopefully you track employee hours and can pull time-keeping and payroll records to get an accurate monthly picture.
When you’re calculating the full-time and full-time equivalent employees for the preceding calendar year, keep in mind:
Monitoring your full-time employee count is important not only for determining ALE status, but also because it’s a trigger for when employees are eligible for coverage. There are measurement methods for this, too – the monthly measurement method and the look-back measurement method, which is often used with variable-hour employees. Basically, when an employee becomes full time, you must offer minimum essential coverage under the ACA to avoid penalties.
You’ve figured out your full-time employees, but now you need to consider your full-time equivalents, too. A full-time equivalent is a combination of part-time employees that counts as a full-time employee.
To determine the number of full-time equivalent employees for a month:
For example, if seven employees work 20 hours/ week, you would have four FTEs. (7 X 20 hours/week = 140; 140 X 4 weeks/month = 560; 560 (divided by) 120 = 4.66, or rounded down, 4)
Once you’ve calculated your full-time equivalents, add that to the number of full-time employees on staff to determine whether or not you’re an applicable large employer.
Something else to keep in mind: An ALE may be a single entity or may consist of a group of related entities (such as parent and subsidiary, or other affiliated entities). If the combined number of full-time and full-time equivalent employees for the group is large enough to meet the definition of an ALE, then each employer in the group (called an ALE member) is part of an ALE – and subject to the Employer Shared Responsibility provision, even if it wouldn’t be an ALE separately.
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