As an employer, it’s essential to understand the requirements of the Affordable Care Act (ACA). This includes the definition of an Applicable Large Employer (ALE). ALEs have specific obligations under the ACA, and failing to comply with these requirements can result in penalties. In this post, we’ll discuss who qualifies as an Applicable Large Employer under the ACA and what it means for your business.
What is an Applicable Large Employer (ALE)?
Under the ACA, an Applicable Large Employer (ALE) is defined as an employer who had an average of at least 50 full-time employees, including full-time equivalent employees, during the previous calendar year. Full-time employees are those who work, on average, 30 or more hours per week or 130 hours or more per month. Full-time equivalent employees are a combination of part-time employees whose combined hours of service are equivalent to a full-time employee.
ALE status is determined on a calendar year basis. This means employers need to calculate their workforce size each year to determine if they qualify as an ALE for the following year.
How is ALE status determined?
To determine if your business qualifies as an ALE, you need to count the number of full-time employees and full-time equivalent employees you had during the previous calendar year. This calculation involves several steps:
Step 1: Count your full-time employees: Add up the total number of employees who worked, on average, 30 or more hours per week or 130 hours or more per month during the previous calendar year.
Step 2: Count your full-time equivalent employees: Add up the total number of hours worked by all your part-time employees (those who work less than 30 hours per week) during the previous calendar year and divide by 120. This will give you the number of full-time equivalent employees.
Step 3: Add your full-time employees and full-time equivalent employees: Add the number of full-time employees from Step 1 to the number of full-time equivalent employees from Step 2. This will give you your total workforce size for the previous calendar year.
Step 4: Determine if you meet the threshold: If your total workforce size is 50 or more employees, you qualify as an ALE for the following calendar year and are subject to the ACA requirements.
What are the ACA requirements for ALEs?
As an ALE, you have certain obligations under the ACA, including:
- Offering affordable health coverage: ALEs are required to offer affordable health insurance coverage that provides minimum value to at least 95% of their full-time employees and their dependents. If you fail to meet this requirement, you may be subject to penalties.
- Reporting requirements: ALEs are required to report information about the health insurance coverage they offer to their employees and the IRS. This includes filing Forms 1094-C and 1095-C to provide information about the coverage offered and the employees enrolled in the coverage.
- Paying shared responsibility penalties: ALEs may be subject to shared responsibility penalties if they fail to offer affordable health coverage that meets the minimum value requirements and at least one of their full-time employees receives a premium tax credit to purchase coverage through the Health Insurance Marketplace.
It’s crucial for ALEs to stay compliant with these requirements to avoid penalties and ensure they are meeting their obligations under the ACA. If you have any questions about your status as an ALE or the associated requirements, contact IBT Consulting today.