Why Employers Need to Count Employees to Ensure Compliance
It’s important for employers to keep a headcount of employees. Knowing how many full-time employees you have is the only way for you to ensure compliance with the Affordable Care Act’s (ACA) “pay or play” provisions and resulting information reporting requirements for applicable large employers (ALEs).
Play or pay is an ACA requirement that mandates companies with over 50 full-time equivalent (FTE) employees to provide health insurance to their employees (“play”) or pay a tax toward a publicly provided system that will cover people without private insurance (“pay”). This is also referred to as the “employer mandate” or “employer shared responsibility.” Simply put, when ALEs don’t offer health insurance, they are subject to penalties.
Identify ALE Status
Categorizing an employer at ALE status for a particular calendar year is dependent upon the size of the workforce in the previous calendar year. Employers averaging at least 50 full-time employees in the prior calendar year— including FTE employees—are deemed ALEs for the current calendar year.
For example, employers will use information about the size of their workforce in 2016 to determine whether or not their company is an ALE for 2017.
Determine Full-Time Employees
For the ACA’s “pay or play” and information reporting provisions, a full-time employee is an employee who is employed on average at least 30 hours of service per week. The monthly equivalent culminates to 130 hours of service in a calendar month.
An FTE employee is a combination of employees who are not full-time individually, but in combination are equal to a full-time employee. The IRS website provides more information on identifying who is a full-time employee and what counts as an hour of service.
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