Applicable Large Employers (ALE) with 50 or more full-time employees must provide affordable, minimum value coverage to full-time employees and their dependents or be subject to a tax penalty. Some employers may consider themselves “small employers,” but may actually be ALEs because they are part of a controlled group.
Under the employer shared responsibility rules, an employer is part of a controlled group if the employer has a common owner or is otherwise related.
There are three types of controlled groups: Parent/Subsidiary; Brother/Sister and combined.
A Parent-Subsidiary controlled group exists when companies are connected through stock owned with a common parent. 80% of the stock of each company must be owned by one or more members of the group, and the parent must own at least 80% of one other company.
A Brother-Sister controlled group exists when one or more companies have a controlling interest of 80% or more of the stock of each corporation. Alternatively, a brother-sister controlled group may arise when there is effective control and more than 50% of the stock of each corporation is owned jointly.
A Combined controlled group consists of 3 or more companies that are organized so that each is a member of either a parent-subsidiary or brother-sister group and at least one corporation is the common parent of the parent-subsidiary and the brother/sister group.
Employers that think they are small employers but have affiliated companies should review the rules to determine if they are members of a controlled group. The controlled group rules may make the employer subject to ACA obligations.