Determine ALE Status
Determining Applicable Large Employer (ALE) Status
- Who: Employers employing 50 or more full-time employees or a combination of full-time and full-time equivalents
- Why: If these employers do not offer minimal essential health coverage that provides minimum value and is affordable to their full-time employees, the employer may be subject to an Employer Shared Responsibility penalty
- How: Under the Employer Shared Responsibility provisions
Employers with 50+ Full Time employees
If an employer had a monthly average of 50 or more full-time and/or full-time equivalent employees in the previous calendar year, they are an Applicable Large Employer (ALE) for the current calendar year.
- Full Time Counts
- Full-time employees are those that work on average at least 30 hours per week or greater than, or equal to 130 hours in any month
- Full-time equivalents are calculated by taking the hours worked by all part-time employees in a given month and dividing that amount by 120 (each employee is capped at 120 hours for the month)
- For each month, total both categories together to determine total number of full-time employees
Employers with Companies under “Common Ownership”
- Common Ownership refers to a group of employers that are treated as a single employer under IRS regulations. There are complex rules in making such a determination and one should seek proper legal counsel for guidance in this area.
- Commonly owned employers must aggregate the hours-of-service and employee counts to determine ALE status.
- If the group of employers is determined to be an ALE for the current year, each ALE Member, or another member in the commonly owned group, must make an offer of insurance that is Minimum Essential Coverage (MEC), Minimum Value (MV) and Affordable to eligible employees, and at least MEC to their dependents.
- The ALE (or each ALE Member) will have an IRS reporting requirement.
How does an employer determine if they are an ALE? Let’s do the numbers …
- Bucket 1 – Full-time employee (FT) : For each month of the preceding calendar year, sum the total of workers who are full-time employees.
- A Full-Time Employee is anyone who works an average of > = 30 hours/week, or > = 130 hours/month. (Note: 130 hour equivalent MUST be applied consistently)
- Bucket 2 – Full-time equivalent (FTE) : For the preceding calendar year, sum total hours per month for workers who are not full-time employees (cap any single worker’s hours at 120), seasonal workers included, divide by 120 (Fractions are included for each monthly calculation and may round to the nearest 100th).
- TRICARE (Veterans Administration) Coverage Exemption : TRICARE is the health care program for uniformed service members. It includes active duty and retired members of the: U.S. Army, U.S. Air Force, U.S. Navy, U.S. Marine Corps, U.S. Coast Guard, the Commissioned Corps of the U.S. Public Health Service and the Commissioned Corps of the National Oceanic and Atmospheric. Exclude any full-time or full-time equivalent employees for any month in which the employee has coverage under a plan described in section 4980H(c)(2)(F) (Generally, TRICARE or Veterans Administration coverage).
- Seasonal Worker Exclusion : Exclusion – If the sum of an employer’s full-time and full-time equivalents is 50 or more for 120 days* or less and employees in excess of 49 who were employed during that period are seasonal workers, the employer is not considered to be an ALE.
- A seasonal worker is a worker who performs labor or services on a seasonal basis, including (but not limited to) workers covered by 29 CFR 500.20(s)(1)*, and retail workers employed exclusively during holiday seasons.
- Employers may apply a reasonable, good faith interpretation of the term seasonal work and a reasonable good faith interpretation of 29 CFR 500.20(s)(1) (including as applied by analogy to workers and employment positions not otherwise covered under 29 CFR 500.20(s)1)).
- 29 CFR 500.20(s)(1) Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year.
- *For this purpose only, the four calendar months may be treated as the equivalent of 120 days. The four calendar months and the 120 days need not be consecutive.
- Determine the totals for each calendar month:
- Full-time employees (including seasonal workers) PLUS
- Full-time equivalents (including seasonal workers) for each calendar month
- Add the 12 monthly totals to determine the annual sum
- Divide the annual sum by 12 to get a monthly average*
- If the monthly average is 50 or greater, the employer is an Applicable Large Employer
*If not a whole number, round down to the next lowest whole number
For additional information, contact ACA GPS: firstname.lastname@example.org or 470-239-5524 xt 4050.
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