There is a new set of rules for employers under the Affordable Care Act (ACA), also called “ObamaCare” or “the Act”. Any business considered to be a “Large Employer” must offer its employees health insurance coverage that meets the requirements of the ACA. A business’s failure to offer that insurance could result in a series of penalties for the employer. But there is some good news – these employee health insurance requirements only apply to “Large Employers”. Not surprisingly then, one of the most common questions asked among small businesses today – “Do the Affordable Care Act rules apply to my business?”

Is My Business a Large Employer?

This is the starting point for an employer’s application of the Affordable Care Act. Businesses that, during the previous year, averaged having at least 50 full-time employees, or “full-time equivalent” employees, are considered to be Large Employers for the current year. (The year is the January to December calendar year.) Such Large Employers are subject to ACA rules. So naturally, the next common question – “How does a business calculate its number of full-time (or whatever) employees?”

What are Full-Time (FT) or Full-Time Equivalent (FTE) Employees?

Determining the number of full-time (FT) employees is relatively easy. An employee who averaged working at least 30 hours each week is considered full time. For the purposes of ACA, the number of hours worked for full-time is not 40, or 37.5, or 35 – it is 30 hours, averaged weekly.

The full-time-equivalent (FTE) calculation was created for employers with a sizable staff of part-timers – those employees that averaged working less than 120 hours monthly. To determine the number of FTE’s, the total number of hours by part-time workers are combined (or “aggregated”) and divided by 120. Note: there are somewhat different rules for seasonal workers (ie: some farm workers; possibly even tax return preparers).

Yet, the combined sum of the previous year’s FT’s and FTE’s determines whether your business meets the “50-employee threshold” to be considered a Large Employer for the current year. VERY IMPORTANT NOTE: Part-time employees’ hours are considered, in determining whether a business is a Large Employer. However, Large Employers are not required to actually offer insurance coverage to part-time employees.

These initial calculations give any employer the basic determination of whether it qualifies as a Large Employer, having to then meet the health insurance requirements of the Act.

Insurance Requirements and Penalties Under ACA

For an applicable “Large Employer” to avoid penalty under the Affordable Care Act, it must offer health insurance coverage to its full-time employees. That insurance plan offered must meet three requirements:

  1. The insurance plan must provide minimum essential coverage for the eligible employees and their dependents;
  2. The insurance plan must meet at least the minimum value to each employee eligible; and
  3. The insurance plan must be affordable to the employee.

In Part 2 of this article, we summarize the rules, plus also consider the applicable penalties when a Large Employer does not meet the three set of standards under the Affordable Care Act.

You can imagine how complicated the tax rules surrounding the ACA can be for a large employer, and how easy it can be to get into trouble with the IRS. If you or your business becomes the subject of an IRS criminal investigation related to the ACA or for any other reason, contact professional IRS tax defense attorney Jeffrey Anton Collins of Tax Law Offices in Naperville, IL today! An IRS criminal investigation is a very serious matter, and the sooner you retain the help of a specialized tax attorney like Mr. Collins, the better your chances are of a successful result.