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Counting Your Employees For Affordable Care Act (ACA) Compliance Purposes

It seems like a simple question: how many full-time workers does your organization employ? But, when it comes to the ACA, the calculation can be complicated and the answer is important.

Potential penalty

The number of workers you employ determines whether your organization is an applicable large employer (ALE). If you are an ALE, your organization may be subject to a penalty tax for either:

  • Failing to offer minimum essential health care coverage to all full-time employees (and their dependents)
  • Offering eligible employer-sponsored coverage that is not ‘affordable’ or does not offer ‘minimum value’

The penalty tax is due if any full-time employee is certified to the employer as having bought health insurance through a Health Insurance Marketplace (commonly known as an “Exchange”) and, as a result, a premium tax credit is allowed or paid to the employee. These requirements are referred to as the “employer shared responsibility provisions.”

Think 50

Your organization is an ALE if you had an average of 50 or more full-time employees — including full-time equivalent employees — during the previous calendar year. Therefore, you will count the number of full-time employees you had during 2019 to determine whether you will be an ALE for 2020.

An ALE is subject to the employer shared responsibility provisions with the potential penalty mentioned above, and it must comply with certain information reporting requirements.

Full-time & seasonal employees

A full-timer is generally an employee who works on average at least 30 hours per week or at least 130 hours in a calendar month. Meanwhile, a full-time equivalent involves more than one employee, each of whom individually is not a full-timer, but who, in combination, are equivalent to a full-time employee.

If you are hiring employees for summer positions, you may be curious as to how to count them. There is an exception for workers who perform labor or services on a seasonal basis. An employer is not considered an ALE if its workforce has 50 or more full-time employees in a calendar year because it employed seasonal workers for 120 days or less.

However, while the IRS states that retail workers employed exclusively for the holiday season are considered seasonal workers, the situation is not so clear-cut when it comes to summer help. It depends on several factors.

Very much in effect

Although 2017’s Tax Cuts and Jobs Act effectively eliminated the ACA’s individual mandate, the employer shared responsibility provisions (sometimes called the ‘employer mandate’) remains very much in effect. Contact us for help calculating your full-time employees and to make sure your organization remains in compliance with the ACA.

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