IRS Explains Definition of ‘Large Employer’

May 21, 2015 Robert Sheen Affordable Care Act, Applicable Large Employer (ALE), IRS

The IRS has issued an explanation of how companies can determine if they are an ”applicable large employer” or ALE, and how that affects their obligations under the Affordable Care Act.

Some provisions of the ACA apply only to ALEs, which are generally those with 50 or more full-time or full-time equivalent employees. These employers are subject to the employer shared responsibility provisions and to the annual employer information return provisions.

For example, in 2016 applicable large employers will have annual reporting responsibilities concerning whether and what they offered in 2015 to their full-time employees, who are those working at least 30 hours per week.

All employers, regardless of size, that provides self-insured health coverage must file an annual return certain information for individuals they cover. The first returns are due to be filed in 2016 for the year 2015.

Effective for the calendar year 2015, ALEs with 100 or more full-time or full-time equivalent employees will be subject to the employer shared responsibility provision and therefore may have to make a shared responsibility payment.

This applies to employers that do not offer adequate, affordable coverage to their ful-time employees and one or more of those employees get a premium tax credit. The employer shared responsibility provisions will be phased in for smaller ALEs in 2016.

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year.

To determine its workforce for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.

Employers with more than 50 cannot purchase health insurance coverage for its employees through the small business Health Optio Program– better known as the SHOP Marketplace. However, employers that have exactly 50 employees or less can purchase for their employees through the SHOP.

For more information, see the page. Determining if an Employer is an Applicable Large Employer on the IRS website.

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