The size of your workforce matters for ACA compliance, says IRS

Under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), the size and structure of your workforce – small or large – helps determine which parts of the law, including several tax provisions, apply to a particular organization, the IRS is reminding employers. The number of employees you had during the prior year determines whether your organization is an applicable large employer, or ALE, for the current year.

The IRS recently issued a tax tip reminding employers that this is important because two provisions of the ACA apply only to applicable large employers. These are the employer shared responsibility provision and the employer information reporting provisions for offers of minimum essential coverage.
An employer with 50 or more full-time employees or full-time equivalents is considered an ALE under the ACA. Because the vast majority of employers fall below the workforce size threshold on which ALE status is based, most employers are not subject to these provisions. Employers with fewer than 50 full-time or full-time equivalent employees are not ALEs.

How to calculate ALE status. For purposes of the employer shared responsibility provision, the number of employees a business had during the prior year determines whether it is an ALE the current year. Employers make this calculation by averaging the number of employees they had throughout the year, which takes into account workforce fluctuations many employers experience. Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year.

To determine your workforce size for a year, you add the total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year. You then divide that combined total by 12.
Those wishing to have more information are directed by the IRS to visit its Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

SOURCE: IRS Health Care Tax Tip 2016-11, January 27, 2016

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