Whether an employer is an Applicable Large Employer (ALE) under ACA depends on whether the employer had an average of at least 50 full-time employees during the previous calendar year. This number includes full-time equivalent employees.
If an employer did NOT have at least 50 full-time employees during the prior year, the employer is NOT an ALE for the current calendar year.
Keep Paying Attention: Rules Will Change
In 2015, employers were permitted to determine their ALE status by using any consecutive six-month period from 2014. For 2016, this method can no longer be used. Employers must now calculate the average employees who worked during all 12 months of the 2015 calendar year.
Calculating Your Business Size
To determine its size, an employer must:
- Determine the number of full-time employees employed during each month of the prior calendar year.
- Determine the number of full-time equivalent employees employed during each month of the prior calendar year.
- Add the totals from each month and divide by 12.
Calculating Full-Time Equivalent Employees
Full-time employees are those who work an average of 30 or more hours per week.
The number of full-time equivalents is determined by adding up the hours worked by part-time employees during the month and dividing by 120.
This gives you the full-time equivalent count for that month. To calculate your yearly average, you must repeat this process for each calendar month.
Round Down, not Up
If your final average is not a whole number, it is rounded down. For example, if you employed, on average, 49.8 during the year, you would round down to 49.
If the result is less than 50, the employer is not subject to the ACA rules for the current year and need not take any other action.
Remember that in making your ALE determination, related entities or control groups are counted together for the determination.
See ACA Count – Control Group for additional information.