Affordable Care Act
Effective January 1, 2015, the Affordable Care Act (also known as ObamaCare), defines all employers with 50 or more full-time employees and equivalents as Applicable Large Employers (ALEs). ALEs are required to comply with two mandates:
- Offer insurance to qualifying full-time employees and their dependents (this is known as the Employer Shared Responsibility Payment Mandate), and
- Report to the IRS on the insurance coverage offered (or not offered) to those qualifying full-time employees (this is known as the Employer Information Reporting Mandate)
No employer with fewer than 50 full-time employees and equivalents is subject to these mandates.
Employers must determine their ALE status for the upcoming year, based on current-year employee information. For example, if you have 50 full-time employees (including full-time equivalents) for 2014, you will be considered an ALE for 2015 by the IRS. The IRS has instructed employers to use the monthly measurement method to determine workforce size, and therefore identify full-time employees who are eligible for health care. This can be done by counting the employee's hours of service for each month, across the months of the current year.
The IRS defines:
- Hours of Service as each hour for which an employee is paid, or entitled to payment (vacation, sick, holiday, disability, layoff, jury duty, military duty, or leave of absence)
- A full-time employee as any employee working an average of 30 hours or more per week, for more than a 120 days in a year or 130 hours per calendar month
- A full-time equivalent (FTE) as any employee who is not considered a full-time employee in any given month, who works less than 30 hours per week or 120 hours per month, but who, in combination, are counted as the equivalent of a full-time employee
- A seasonal employee as any employee who works 120 days or less during a calendar year. Seasonal workers are taken into account in determining the number of full-time employees. However, if your workforce exceeds 50 full-time employees (including full-time equivalents) for 120 days or fewer during a calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal workers, you are not considered an ALE.
Note: The IRS has postponed the Employer Shared Responsibility Mandate for certain ALEs, extending the effective date to January 1, 2016 if an ALE has only 50-99 full-time employees and equivalents.
The Employer Information Reporting Mandate however, has not been delayed, therefore ALL ALEs are required to comply with the initial reports (Form 1094-C and Form 1095-C) that are due to employees by January 31, 2016, and to the IRS by February 29, 2016.