How to calculate your number of employees under the ACA
In the years ahead, employers of all sizes will in some way be affected by the Affordable Care Act (ACA). While the impact may be less to some, employers with 50 or more full-time and full-time equivalent employees may potentially face significant financial penalties under the ACA's shared responsibility provision.
Is my business subject to ACA's employer shared responsibility penalties?
Beginning in 2015, employers with 50 or more full-time and full-time equivalent employees during the previous calendar year have a shared responsibility under the ACA to offer minimum essential coverage. Failure to meet this employer shared responsibility could subject the employer to penalties.
Determining employer size
For purposes of determining employer size, an employer counts both full- and non full-time employees, which includes part-time, temporary and seasonal employees. Your total number of full-time employees is used to calculate actual penalty amounts.
How do I determine how many employees I have?
The ACA provides a formula for calculating full-time and full-time equivalent employees for purposes of the employer shared responsibility penalty. First, calculate the total number of full-time employees who worked an average of 30 hours per week, or 130 hours, for a given month. Second, calculate the number of non full-time employees by dividing the total number of hours of service for which wages were paid or due to non full-time employees during a particular month by 120. You then add the equivalent number of non full-time employees to the number of full-time employees from the first calculation to get the total number of employees.
Note: Seasonal employees who work less than 120 days in a calendar year are not considered in this calculation if the employer is determined to be a large employer as a result of adding in the seasonal employees.
Calculating employer size:
Let's say an employer has a total of 90 employees (40 full-time and 50 part-time). The part-time employees average a combined total of 1,650 hours worked per month. Divided by 120*, the employer would have 13.75 full-time equivalent employees. Thus, in this example, the total employer size (total full-time and full-time equivalent employees) would be 53 (40 + 13), according to ACA regulations, fractions round down. This means the employer could potentially be assessed a penalty the next year. For 2014, an employer may determine if it is an applicable large employer by determining whether it employed an average of at least 50 full-time employees on business days during any consecutive six month period in 2013.
*Non full-time hours are capped at 120 hours per month for the purpose of ACA calculations.
Wellmark is here to inform, lead, assist and support you through all the ACA changes as you make your decisions about your group health plan. For more information on health care reform, call your Wellmark representative.