Each U.S. employer must know its number of full-time employees to determine if it is subject to health care reform. Employer shared responsibility and Affordable Care Act reporting apply to large employers- those employers with 50 or more full-time/full-time equivalent employees.
To determine the employee count, employers must average the number of their full-time or full-time equivalent employees from the previous calendar year. If that number is 50 or greater, the employer is an applicable large employer. For purposes of determining whether an employer is an applicable large employer, the employer must use 120 hours per month as the basis to identify full-time employees (instead of the 130 hours per month used to determine full-time status for health coverage eligibility).
The IRS has proposed the following method for calculating the number of full-time employees during the previous calendar year.
- Step 1: Calculate the number of full-time employees for each calendar month in the preceding calendar year.
- Step 2: Calculate the number of full-time equivalents for each calendar month in the preceding calendar year.
- Step 3: Add the number of full-time employees and full-time equivalent employees obtained in Steps 1 and 2 for each month of the preceding calendar year.
- Step 4: Add up the 12 numbers from Step 3 and divide the sum by 12. This is the average number of full-time employees for the preceding calendar year.
- Step 5: If the number obtained in Step 4 is less than 50, then the employer is not an applicable large employer for the current calendar year. If the number obtained in Step 4 is 50 or more, the employer is likely an applicable large employer (note that extra steps can be taken if the employer has seasonal workers).
