Because an applicable large employer (ALE) is subject to the Affordable Care Act’s requirements for information reporting and the health law’s employer shared responsibility provisions, the IRS has provided a short primer on how a company can determine whether it is an ALE.
The ACA classifies a company as an ALE if it had an average of at least 50 full-time employees, including full-time equivalent employees, during the prior year.
The steps a company should follow to make this calculation include:
- Determining how many full-time employees it had in each month of the prior year. This provision defines a full-time employee for any calendar month as one who has, on average, at least 30 hours of service per week.
- Determining how many full-time-equivalent employees the company had in each month of the prior year. This is done by combining the number of hours of service of all non-full-time employees for the month – up to but not exceeding 120 hours per employee – and dividing that total by 120.
- For each calendar month, the employer then adds its full-time and full-time equivalent employees for a monthly total. It then add the monthly totals for the full year, and dividing the sum of the monthly totals by 12. If the result is 50 or more employees, the company is an applicable large employer.
If a company’s owners also own or control another employer, or several employers, the ACA treats all the employers in this aggregated group as a single employer for determining applicable large employer status.
Detailed information is on the IRS website about ALE information reporting requirements and the ACA’s employer shared responsibility provisions. Information can also be found there about rules to determine who is a full-time employee and what counts as hours of service.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.