The Affordable Care Act requires applicable large employers (ALEs) to offer health coverage to full time employees and their dependents. A “full-time employee” is defined as an employee who, in any month, works at least 30 hours per week. 130 hours of service in a calendar month is considered the equivalent of 30 hours per week. In fact, for both the look-back and monthly measurement methods, an employer must use 130 hours per month for determining whether an employee is full-time or not full time.
To determine if an employer is an ALE and subject at all to the ACA employer mandate, an employer must have 50 or more full-time employees on “business days” during the preceding calendar year. An employee is considered full-time for ALE determination purposes if the employee has 120 hours of service in a month (not 130 hours, which is the requirement for offering medical coverage). Part-time employees are considered in calculating the number of full time employees for this purposes. To convert a part-time employee to a full-time equivalent employee, first count the aggregate hours of service in a month for all employees who are not full time for that month (i.e., for all those who do not work 120 or more hours). Second, divide the total number of hours by 120. This will yield the number of full-time equivalent employees for the month.
Employers should understand the two different calculations of full-time employees for determining ALE status and the requirement to offer medical coverage.