ACA – Thresholds to Change for 2016 Reporting

Written by Ross Mendheim, CPA and Kay Troupe

The Affordable Care Act contains specific responsibilities for employers. The size and structure of your workforce — small, large, or part of a group — help determine what applies to you.  For companies who may be considered an Applicable Large Employer (ALE), you should be aware that the thresholds are going to change.

The Employer Mandate of the ACA was partially implemented in 2015. Businesses with 100 or more full-time equivalents (FTEs) were required to comply with the employer mandate to avoid penalties. Employers with 50 or more FTE’s had to report in 2015, but they were not subject to penalties for non-compliance.

However in 2016, the Employer Mandate requirements are being fully implemented.   If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the 2015 calendar year, the employer is considered an ALE for 2016 and is, therefore, subject to the employer shared responsibility provisions, the employer information reporting provisions and will now be subject to penalties for non-compliance.

You need to keep in mind, however, that FTEs are not the same as conventional full-time employees.  This difference can trigger compliance for thousands of unsuspecting organizations.

How do you determine your ALE count?

A full-time employee for any calendar month is an employee who has, on average, at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.

A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee. An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

1. Combine the number of hours of service for all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
2. Divide the total by 120.

ALE Count

1. Add the number of full-time employees for each calendar month in 2015
2. Add the number of total full-time equivalents for each calendar month in 2015
3. Add the total number of full-time employees and the number of full-time equivalents and divide by 12
4. If the number is 50 or greater you are an Applicable Larger Employer (ALE) and you must comply with the Employer Mandate for 2016.

There are many intricacies when it comes to determining full-time and EFT employees.  If you are unsure as to your status or how to calculate your employee totals, please contact your BMSS professional.  We can review your organization and payroll records to help you determine employee status and develop a plan of action to implement careful record-keeping policies and systems to ensure that all obligations are met and complied with.