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The Affordable Care Act (ACA) imposes specific benefits and responsibilities on employers. The size and structure of your workforce play an important role in determining which provisions of the ACA apply to your business. Here’s what you need to know to stay compliant and take advantage of potential benefits.

Determining Employer Size

The ACA categorizes employers based on the number of full-time employees, including full-time equivalent employees (FTEs). A full-time employee for determining employer size is an employee who works 120 or more hours per month. To determine workforce size for a year, an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12. To calculate full-time equivalent employees, combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and divide the total by 120.

For help determining your workforce size, refer to the IRS guidelines on whether your business qualifies as an Applicable Large Employer (ALE) here.

Provisions for Small Employers

If your business has fewer than 50 full-time employees, including FTEs, you may qualify for specific benefits:

• Small Business Health Care Tax Credit: Employers with fewer than 25 full-time employees may be eligible for this credit to help offset the costs of providing health coverage.
• SHOP Marketplace: Employers with 50 or fewer employees can potentially purchase insurance through the Small Business Health Options Program (SHOP). In some states, this option is available to employers with up to 100 employees.

Responsibilities for Applicable Large Employers (ALEs)

If your business has 50 or more full-time employees, including FTEs, you are considered an ALE and must comply with additional requirements:

• Reporting Obligations: ALEs must issue statements to employees and file an annual information return detailing the health insurance coverage offered (Form 1095/1094). This is part of the employer shared responsibility provisions.
• Employer Shared Responsibility: ALEs may be subject to penalties if they do not provide affordable health insurance that meets minimum coverage standards.

Self-Insured Employers

Regardless of your workforce size, if your business provides self-insured health coverage, you are required to file an annual return reporting specific information for each covered employee and provide similar details to covered individuals (Form 1095/1094).

Aggregated Groups

If your business is part of an affiliated or controlled group with common ownership, you must aggregate your employees to determine if you qualify as an ALE. This aggregation ensures that the collective size of your workforce is considered for ACA obligations.

Staying Informed

All employers, especially ALEs, must stay informed about their responsibilities under the ACA. The IRS provides resources and updates through the Applicable Large Employer Information Center, helping businesses remain compliant with the law. Click here.

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