If you are considered an applicable large employer (ALE) under the Affordable Care Act (ACA), then you will need to determine the ACA benefits of each employee. Then, your full-time workers must be given access to health insurance. The ACA carries strict penalties if you don’t offer health insurance when you’re required to, so it’s important to see if you meet the ACA hours requirement. 

How to Determine If You’re an Applicable Large Employer (ALE)

Under the ACA, you are considered an ALE if you have 50 or more full-time employees. This number is calculated by adding your full-time employees to your full-time equivalent (FTE) workers. If the total amount averages at least 50 or more per month, you must offer health insurance. 

When doing an ACA payroll review, it’s important to remember that you aren’t required to actually give health insurance to all of your employees. You are simply required to offer an affordable plan that covers a minimum value of services to at least 95% of your workers. It is up to your employees whether they decide to accept your offer or not.

An ACA full-time employee is anyone who works an average of 30 hours a week or more over the course of a month. If they are an ACA full-time employee, they automatically count as one full-time worker for figuring out your ALE eligibility. 

You’ll deal with the impact of the ACA and part-time employees a little differently. To meet the ACA hours requirement and be considered an ALE, you add up all of the hours your part-time employees worked during an entire month. Then, you divide this figure by 130.

The resulting figure is your ACA full-time equivalent (FTE). You need to add the ACA full-time equivalent to the number of full-time workers. The resulting figure is the number of full-time workers you have.

 

How Do You Calculate ACA Benefits Eligibility?

Once you have determined the ACA full-time equivalent and ACA full-time employee count for your prior year, the next step is figuring out the ACA benefits eligibility of each worker. To do this, you can use the monthly measurement period or the look-back method. Because of its greater simplicity, most employers prefer the look-back method. 

The Monthly Measurement Method

Using the monthly measurement method involves looking at each employee’s hours for the previous month. If they worked more than 30 hours a week, you must offer them health insurance. However, this method tends to be less popular because it is inconvenient if you have many part-time workers or people who have variable hours.

The Look-Back Method 

The look-back method is commonly used to calculate ACA employee eligibility. With this method, there is a measurement period, an administrative period, and a stability period. The measurement period is when you track and average the employee’s hours. This measurement period can be as short or long as you want, but you must use the same measurement period for every employee. 

After the measurement period is complete, you enter the stability period. This is when insurance is offered to your eligible workers. If you need it, the ACA also lets you include an administrative period in between the measurement period and stability period so that you have time to determine which employees are eligible and get them signed up for insurance. 

 

Calculating Full-Time Equivalents (FTE) Under the ACA

If you’re struggling to figure out your ACA benefits eligibility, the following examples can help. In the first example, the company has 15 full-time employees. Then, the 4,030 hours worked by part-time employees are divided by 130 to get 31 FTE workers. As a result, this workplace has less than 50 full-time and FTE employees. It won’t need to offer insurance during the following year. 

	Full-Time and FTE Workers
15 full-time employees	15
4,030 hours worked by part-time employees	31
Total	46

 

In the second example, the business has fewer full-time employees. However, the 5,330 hours worked by part-time employees result in an ACA full-time equivalent of 41. Once you add this together, there are 51 full-time employees in total. During the following year, this employer would be required to offer health insurance.

 

	Full-Time and FTE Workers
10 full-time employees	10
5,330 hours worked by part-time employees	41
Total	51

 

It is important to remember that your ACA hours requirement uses the employment history from the previous year. Even if you lose several workers and drop below the ACA full-time employment requirement, you will still need to offer health insurance if you had more than 50 workers on average during the prior year. 

 

Full-Time and Exempt Employees

In a recent Mission to Grow podcast on the “Affordable Care Act: Rules, Records and Repercussions,” the principal at Jackson Lewis P.C., Brian Shenker, discussed how salary and exempt employees can make hours tracking a little more difficult. Because you wouldn’t normally track their hours, you have to use two different assumptions to figure out their hours. 

If an exempt employee works at least one hour a day, you can count it as a full day’s work. Alternatively, you can credit the employee for an entire week of work for any week where they contributed at least a single hour of service.

 

Part-Time Employees

Part-time employees don’t have to receive insurance under the ACA. However, you are required to distribute an ACA notice about the availability of insurance on the Health Insurance Marketplace to all of your part-time and full-time workers.

 

How Does the ACA Deal With Seasonal Employees?

Seasonal workers are treated differently under the ACA. When calculating whether you are an ALE, you can go over 50 employees if the extra workers are seasonal employees. 

If your workforce has more than 50 full-time employees for 120 days or less a year, then you aren’t considered an ALE. The 120-day rule applies at any point during the year. For example, you are counted as an ALE if you have more than 50 workers for three months in the springtime and one month in the fall. 

 

Determining Your ACA Hours Requirement to Become an ALE

Once you have met the ACA hours requirement to be an ALE, you must determine the ACA benefits eligibility of all of your employees. You should consider the impact of the ACA and part-time employees as well as what an ACA full-time equivalent is. By calculating your ACA full-time employee count, you can see if your company must offer health insurance.

Through ACA payroll services, you can calculate your ACA full-time equivalent and your ALE eligibility. To discover more information about calculating your ACA eligibility, reach out to our small business HR & payroll experts today.