IRS Guide
Are you an ALE?
For Affordable Care Act purposes, an ALE (Applicable Large Employer) is an employer with at least 50 full-time employees. But, “full time” doesn’t mean ONLY full time. People working part-time or seasonally are added into the mix to create full-time-equivalent employees, or FTEs.
Your ALE status is based on the number of full-time employees and full-time equivalents you had in the previous calendar year. So for 2015 compliance, 2014 data is key.
Businesses that have a common owner or are otherwise related are aggregated together to form one entity for ALE purposes; the total number of employees for the whole business group is used to determine ALE status, according to the IRS. Nonprofit, for-profit and government entities are all subject to the employer shared responsibility rules.
How to determine your status
1. Count your full-time employees
A full-time employee is defined as someone who works at least 30 hours per week, or 130 hours in a month.
For 2014 tracking only, the government is allowing employers to use six consecutive months of employee counting, rather than the full 12 calendar months.
2. Count your full-time-equivalent employees
The hours that your part-time employees work – including seasonal staff – are grouped together to determine your full-time-equivalent employees.
For each month in the calendar year, add the total number of hours that your part-time and seasonal employees work for that month. Divide the total by 130. The result is the number of FTEs employed for that month.
3. Calculate your total
For each month, add the total full-time employees in step 1 to the total FTEs in step 2. Repeat this process for all 12 months (or six months, if you are using the six-month period being allowed for 2014).
Add all the monthly totals and divide by 12 (or six if using the six-month period in 2014) to determine the average number of full-time employees for the year. The resulting number is rounded down, if that number is not a whole number. If the result is 50 or more, you are an applicable large employer and are subject to employer shared responsibility (aka “pay or play”) rules for the following calendar year.
Note: While seasonal employees are figured into the equation, if your workforce exceeds 50 employees for 120 days or less during a calendar year – and the employees in excess of 50 were seasonal – the employer is not an applicable large employer.
What if I’m an ALE?
If you’re a large employer with 50 or more employees, you should have been collecting employee data and determining number of employees throughout 2014. In 2015, you’ll be responsible for complying with the employer shared responsibility rules. Beginning Jan. 1, 2016, you’ll be responsible for filing new IRS reports each year.
For those with 50-99 employees, you may have a reprieve until 2016 if you meet specific requirements. If you qualify for the reprieve, you have 2015 to get things in order: Beginning in January, you should start tracking employee hours and prepare to provide the required health coverage in 2016.
Employer shared responsibility
Through health care reform, large employers are tasked with offering affordable health coverage to full-time employees. The ALEs who don’t comply with the employer shared responsibility rules could face a tax penalty if just one full-time employee buys individual coverage through a federal or state insurance exchange (aka marketplace) and receives a tax credit or subsidy.
ALEs with coverage plans that follow the calendar year will need to be in compliance as of Jan. 1, 2015 to avoid a penalty. ALEs with non-calendar-year plans will need to be in compliance by the first day of the 2015 plan year to avoid a penalty. For those who qualify for transition relief, those dates are in 2016.
The IRS has released the following guide to help employers understand what they need to report as it pertains to an Applicable Large Employer (ALE) under the Affordable Care Act (ACA).
http://www.irs.gov/pub/irs-pdf/p5196.pdf
