The New Small Group – 50-100 Employees (Part 3)
In Part 1, we looked at the changes in coverage and rating of the New Small Group. Part 2 discussed the penalties for employers that do not abide by the new ACA laws. In this article, we will discuss what an Applicable Large Employer (ALE) is and how that applies to the New Small Group.
Applicable Large Employer (ALE): This is an employer who has 50 or more Full-Time Equivalent (FTE) employees for at least 50% of the prior calendar year. It is important to note that some small employers may have less than 50 FTEs at their place of employment, but may go over that threshold when combined with the employees from other companies that are under common ownership or otherwise related.
To determine how many Full-Time Equivalent employees you may have, use this formula:
1. Total up the number of employees you have that work 30 or more hours per week. These are your full-time employees.
2. Total up the number of part-time hours you pay in a single month for all part-time employees. For example, if you had 5 employees that each worked 25 hours per week, you would have a total of 500 part-time hours in a month. (5 x 25 = 125 hours per week. Multiply this number (125) by 4 weeks in a month = 500 part-time hours in a month).
3. The ACA uses the number 120 as the ‘standard’ number of hours worked in a month to be considered full-time (Note: they use a 4 -week month.) To determine how many of your part-time employees it takes to equal one full-time employee, divide your total monthly part-time hours by 120. In our example, that would be 500 part-time hours divided by 120 hours = 4.167 FTE’s. You are allowed to round down to the nearest whole number, so in our example, our 500 hours of part-time labor equates to 4 Full-Time Equivalent employees.
4. Add the number of Full-time employees (30 hours or more per week) to the number of FTE’s you got in step 4 and you will get your count to determine if you qualify as an Applicable Large Employer.
Example: (45 full-time employees) + (500 part-time hours/120) = 49 Full-Time Equivalent employees.
In this example, the employer is NOT an ALE and does not have to offer health insurance to his/her employees or participate in the ‘Pay or Play’ Mandate (See Part 2). If the above example had either one more Full-Time employee or one more Part-Time employee working 25 hours per week, then this would be an ALE employer and would be mandated to provide health insurance and participate in the Employer Shared Responsibility (Pay or Play).
It is important that employers keep track of their part-time hours on a monthly basis because as soon as you cross that threshold, you become responsible to participate. It is easy to have employees come and go and not realize that you have crossed that threshold. And remember, in 2016 the penalty can be anywhere from $2160 – $3240 per employee depending on the situation. At 50 FTE’s, that would be anywhere from $43,200 – $64,800 in penalties. (See Part 2 for formula)
There are a lot of changes happening for the New Small Group – 50-100 employees. The coverage is different, the way premiums are rated is different, and the things you have to do to stay in compliance with the new laws are different. Pronoeo Insurance Agency can not only educate you on those differences, but we can help you through them so you stay in compliance and do what is best for you and your employees. Call us today for your free consultation. 800-495-2886