Affordable Care Act Coverage Requirements for Full-Time and Full-Time Equivalent Employees

The Patient Care and Affordable Care Act (ACA) is a comprehensive healthcare reform law that was passed in 2010 and places many requirements on certain employers, including requiring them to offer affordable insurance coverage to employees and their dependents. The ACA is complex, and failure to comply with its provisions can result in substantial fines being levied by the IRS.

An employer must first determine if it is an Applicable Large Employer (ALE) and therefore subject to the ACA. The ACA defines an ALE as a business that has 50 or more full-time and full-time equivalent employees, so small family-run delis or hardware stores with a half dozen employees would not be deemed ALEs under the ACA. Where employers run into trouble is if they have both full-time and part-time employees approaching the 50-employee threshold. 

The ACA defines full-time employees as working 30 hours per week, or 120 hours in a calendar month. In order to determine how many “full-time equivalent” employees a business has, the business calculates how many full-time employees it would take to equal the combined hours worked by part-time employees. For instance, three part-time workers who work 10 hours per month would equal one full-time equivalent employee. A company with 40 full-time employees and 20 part-time employees is considered an ALE if the combined hours worked by the part-time employees exceed 300 hours.

Another potentially complex situation arises with affiliated companies. The individual businesses may not meet the 50 full-time employee threshold. However, under the ACA, several related but distinct businesses may be viewed as a single entity.

The IRS has published complex guidelines for companies to follow when doing an aggregated employer analysis. The company must look at the relationships among the affiliated companies, who the owners are and to what extent the companies provide services to each other. 

The complexity of this aspect of the ACA points to the need for companies attempting to comply with the ACA’s provisions to consult with experienced Michigan business lawyers.

The ACA requires ALEs to offer minimum essential coverage to 95% of its employees and their dependents, and it must be affordable.

The attorneys at Bowen, Radabaugh & Milton, P.C. have the expertise to help your business navigate the complexity of the ACA and avoid those steep IRS penalties. Call us today at 248-641-8000 or contact us online to schedule your initial consultation at our Troy, Michigan office.