By Chris Hadden, CPP
Greenshades Software Technical Sales Manager
What in the world is an Applicable Large Employer? With so many employers asking themselves this question right now, let’s take a moment to define what an Applicable Large Employer (ALE) is.
The short answer is, under the Affordable Care Act, your organization is an ALE for a year if you had an average of at least 50 full-time employees (including full-time equivalent employees) during the prior year.
So what’s the difference between a full-time employee and full-time equivalent? For ALE calculation, a full-time employee for any calendar month is a full-time employee who has on average at least 30 hours of service per week during that month. A full-time equivalent is not a definition for a single employee, but instead a calculated number of an organization. An employer determines its number of full-time equivalent employees by combining the number of hours of service for all non-full-time employees for the month (not exceeding 120 hours per employee) and dividing that total number of hours of service by 120.
Keep in mind, all employers with a common owner, or that are otherwise related, generally are combined and treated as a single employer when determining their ALE status.
So now that we know how to calculate our monthly amounts, let’s calculate our ALE status for the year.
- Determine how many full-time employees (FT) you had each month
- Determine how many full-time equivalents (FTE) you had each month
- For each calendar month, sum up your FT and FTE counts to get a monthly total
- Add up the monthly totals and divide by 12
- The answer is your number of full-time employees for ALE calculation.
So what’s your number?
Why does it matter?
- For those with 1-49 full-time employees (including FTEs), you are not considered an ALE and, therefore, do not need to meet the same ACA requirements as ALEs are required to meet.
- For those with 50-99 full-time employees (including FTEs), you are required to meet the same ACA reporting obligations as ALEs, however, you may be eligible for transition relief in 2015 which would allow you to avoid penalties for not offering coverage or offering inadequate coverage to your full-time employees in 2015.
- For those with 100 or more full-time employees (including FTEs), you are required to meet all ACA employer mandates that started on January 1, 2015.