Are You An Applicable Large Employer?

An employer that had an average of at least 50 or more full-time employees in their staff per month is considered as an applicable large employer (ALE).

An applicable large employer status must be determined every year, and these ALEs have to offer health insurance to their employees.

But the main question is, how are full-time employees defined under the Affordable Care Act? The employee who works 30 hours or more per week or worked 130 or more hours per month is considered a full-time employee. 

There are part-time employees also in the organization. To get the full-time equivalent employee’s count, combine the number of hours of all part-time employees and divide it by 120. You can add the resultant count with your standard full-time employees count. From this, you will get total full-time equivalent employees for that month.

You will have to do this calculation every month of the particular year to find out whether you are an applicable large employer or not.

Role of Seasonal Workers

Seasonal workers are those who work on a temporary or seasonal basis for any company. Sometimes the seasonal workers can reduce your full-time equivalent employees count. 

So, if you have more than 50 full-time equivalent employees for 120 days or less per year, you can exclude seasonal workers from your calculation. This will help you to become an applicable large employer.

What happens if companies have a single controlling owner?

Under the rules of section 414 of the Internal Revenue Code, companies that have a common owner are combined together for the purpose of determining whether the employer is an applicable large employer.

For example, if you own two companies, one has 34 FTE, and another has 16 FTE. Then these companies will be combined together to determine the employee count, and you are considered as an applicable large employer.

What happens if companies are controlled by the same group of people?

Most of the time, a company is owned by a group of people. And that same group of people have a partnership with another company. So when determining the employee count, the company would be combined together.

 The Internal Revenue Code makes this rule so that no one can manipulate an attempt to not to qualify as an applicable large employer.

For the particular year in which an employer is an applicable large employer, all the regulations are applicable to each company in which he has a partnership. It doesn’t matter whether the individual company has 50 or more full-time equivalent employees or not.

Wrap Up

Each month you have to count your actual full-time equivalent employees. If you had an average of 50 or more full-time equivalent employees in the last year, then you are an applicable large employer for the next year.

Hence it is vital to reevaluate the results of the prior year to know the average of your workforce count. This will help you to determine whether you are an applicable large employer.


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