It seems like a simple question: How many full-time employees does your small business employ? But, when it comes to the Affordable Care Act (ACA), the answer can be complicated.
The number of workers you employ determines whether your organization is an applicable large employer (ALE). Just because your business isn’t an ALE one year doesn’t mean it won’t be the next year.
50 is the magic number under the Affordable Care Act
Your business is an ALE if you had an average of 50 or more full time employees — including full-time equivalent employees — during the prior calendar year. Therefore, you’ll count the number of full time employees you have during 2016 to determine if you’re an ALE for 2017.
Under the law, an ALE:
- Is subject to the employer shared responsibility provisions with their potential penalties, and
- Must comply with certain information reporting requirements.
Calculating full-time employees
A full-time employee is generally an employee who works on average at least 30 hours per week, or at least 130 hours in a calendar month.
A full-time equivalent employee involves more than one employee, each of whom individually isn’t a full-time employee, but who, in combination, are equivalent to a full-time employee.
What about seasonal workers?
If you’re hiring employees for summer positions, you may wonder how to count them. There’s an exception for workers who perform labor or services on a seasonal basis. An employer isn’t considered an ALE if its workforce exceeds 50 or more full-time employees in a calendar year because it employed seasonal workers for 120 days or less.
The IRS states that retail workers who are employed exclusively for the holiday season and agricultural workers who are moving from one seasonal activity to another qualify as seasonal workers. However, the situation is not so clear cut when it comes to hiring summer help. If you are near the 50 employee limit and are considering hiring summer help, be sure to seek professional advice before hiring these employees to avoid classification as an ALE.
