The Affordable Care Act (ACA) contains several tax provisions that affect employers. For example, the size and structure of your workforce – small or large – will determine which parts of the law apply to your organization. The number of employees you had during the prior year determines whether your organization is an applicable large employer for the current year under the ACA, which contains several tax provisions that affect employers.
The size of your workforce is important in two provisions of the Affordable Care Act, and apply only to applicable large employers. These are the employer shared responsibility provision and the employer information reporting provisions for offers of minimum essential coverage. The vast majority of employers fall below the workforce size threshold on which ALE status is based and therefore are not subject to these provisions.
Your organization’s size is determined by the number of your employees. Here are the guidelines set forth by the IRS:
- An employer with 50 or more full-time employees or full-time equivalents is considered an applicable large employer (ALW) under the ACA.
- For purposes of the employer shared responsibility provision, the number of employees a business had during the prior year determines whether it is an ALE the current year. Employers make this calculation by averaging the number of employees they had throughout the year, which takes into account workforce fluctuations many employers experience.
- Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
- Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year.
To determine your workforce size for a year, you add the 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. You then divides that combined total by 12.
Also see, Understanding Your Responsibility Regarding the Affordable Care Act (ACA).
Five Things You Need to Know
If you are an ALE, here are five things to know:
- Applicable large employers have annual reporting responsibilities. You will need to provide the IRS and employees information returns concerning whether and what health insurance you offered to your full-time employees.
- If you’re an applicable large employer that provides self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover.
- ALEs must either offer minimum essential coverage that is affordable and that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Learn more about the employer shared responsibility provision.
- You may be required to report the value of the health insurance coverage you provided to each employee on their Form W-2.
- If you’re an applicable large employer with exactly 50 employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP).
For more information, see the Affordable Care Act Tax Provisions for Employers page on IRS.gov/aca.
The vast majority of employers will fall below the ALE threshold number of employees and will not be subject to the employer shared responsibility provisions.
Please contact us at 617-657-0057 or here: https://granitepayroll.com/contact-us/ if you have any questions.
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