Are you an ALE?

You are an applicable large employer (ALE) if you averaged at least 50 full-time employees, including full-time equivalent employees, during the prior year. ALEs are subject to the information reporting and employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The IRS recently issued a tax tip reminding employers that it is important to review their ALE status annually.

Shared responsibility. Under Act Sec. 1513(a) of the ACA, employers designated as ALEs must offer employees (and their dependents) health care coverage that meets ACA standards of minimum essential coverage or make an employer shared responsibility payment to the IRS. Employers must make a payment to the IRS if the employer does not offer minimum essential coverage to at least 95 percent of its full-time employees (and their dependents) and at least one full-time employee receives the premium tax credit for purchasing coverage through the health insurance marketplace.”

Determining ALE status
. The IRS provided these three steps for determining ALE status:

• Determine how many full-time workers were employed per month of the prior year. A full-time employee for any calendar month is defined as one who has, on average, at least 30 hours of service per week.
• Determine the amount of full-time equivalent employees for each month of the prior year. To do this, combine the number of hours of service of all non-full-time employees for the month—but no more than 120 hours per employee—and divide that total by 120.
• For each calendar month, add the full-time and full-time equivalent employees for a monthly total. Add the monthly totals. Divide the sum of the monthly totals by 12. If the result is 50 or more employees, you are an applicable large employer.

SOURCE: IRS Health Care Tax Tip 2016-02, January 6, 2016.

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