Applicable Large Employers (ALEs) with more than 50 full-time employees on business days in the prior year must comply with the Affordable Care Act. This compliance requires offering affordable, minimum essential coverage providing minimum value to full-time employees and their dependents. It also requires distributing 1095 forms to all full-time employees and those employees with health coverage (whether full-time or not) and transmitting information to the IRS with Form 1094.
Small employers part of a larger organization may be subject to ACA requirements if they are part of a controlled group. Any organization with multiple employer identification numbers should thoroughly review the ACA controlled group rules to determine which EINs have an ACA requirement. If part of a controlled group, employees of all controlled group members are counted in determining if the 50 full-time employee threshold is met for an ALE determination.
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 and subject to ACA requirements.
