One of the most confusing parts of the Affordable Care Act (ACA) is the Employer Mandate. The first step in deciding if the employer must comply with the Employer Mandate provisions is the determination of whether an employer is an Applicable Large Employer (ALE).
If an employer has an average of at least 50 full-time employees, including full-time equivalent (FTE) employees, during the prior full calendar year, the employer is considered an ALE for the current calendar year. If an employer does NOT have at least 50 full-time employees, including full-time equivalents, on average during the prior full calendar year, the employer is NOT an ALE for the current calendar year.
In making the ALE determination, related entities or control groups are counted together for the determination. To determine whether any affiliated companies need to be included in the calculation, look at the controlled group rules of the Internal Revenue Code Section 414. There are three different types of controlled groups, and, very generally, the controlled group rules use an 80% ownership test to determine whether common ownership exists. If common ownership is found to exist, then for purposes of the ACA and the determination of whether the employer is an applicable large employer, all controlled groups are considered to be part of a single employer (an “Aggregated ALE Group”).
To determine its size for a year:
When counting employees to determine ALE status, an employer does not have to count employees who have medical care through the military. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 provides that an employee will not be counted toward the 50-employee threshold for a month in which the employee has medical care through the military, including Tricare or Veterans’ coverage. This is solely for the purpose of determining whether an employer is an ALE.
So, if the full-time plus full-time equivalent monthly count is 55 but 6 of the full-time employees are covered under Tricare or Veterans’ coverage for that month, then the employee count is 49 for that month.
Whether an employer is (i) a single ALE and not part of an Aggregated ALE Group or (ii) part of an Aggregated ALE Group, then each individual employer (an “ALE Member”) has its own reporting obligations on IRS Form 1094-C and Form 1095-C. On Part IV of Form 1094-C, an ALE Member must list all affiliated entities that are part of the Aggregated ALE Group.
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