18 Jan Determining ACA Compliance: The 50-Employee Calculation
Navigating the intricacies of the Affordable Care Act (ACA) can be a daunting task for business owners, particularly when it comes to understanding whether your company falls under ACA’s purview. A key factor in determining ACA compliance is the employee count.
This article aims to simplify the process by breaking down how to calculate your employee count, including both full-time employees and full-time equivalents.
The ACA and Applicable Large Employers
The ACA introduces the concept of “applicable large employers,” which includes businesses with 50 or more full-time employees. To determine if your company meets this threshold, you must accurately calculate your employee count. Let’s delve into the details of this calculation:
Full-Time Employees
Defining Full-Time Employees:Under the ACA, full-time employees are individuals who work at least 30 hours per week. These are your regular, full-time staff members who meet the ACA’s definition of full-time employment.
Counting Full-Time Employees: Begin by tallying the number of employees who meet the 30-hour-per-week threshold. These individuals directly contribute to your full-time employee count.
Full-Time Equivalents
What Are Full-Time Equivalents: Full-time equivalents are part-time employees whose hours are aggregated and converted into a calculation that approximates full-time employment. This allows for a more comprehensive assessment of your workforce.
Calculating Full-Time Equivalents: To calculate full-time equivalents, you need to total up all the hours worked by your part-time employees (those working less than 30 hours per week) in a given month. For each part-time employee, add up their monthly hours and then divide this total by 120. This calculation ensures that a full-time equivalent represents the equivalent of one full-time employee working 30 hours per week for a month.
Combining Full-Time Employees and Full-Time Equivalents
Determining Your Status: After calculating both full-time employees and full-time equivalents, you’ll need to combine the two figures. This sum provides the average number of employees (full-time and full-time equivalents) per month over the prior year.
Comparing to the 50-Employee Threshold: If your business’s average employee count, which includes both full-time employees and full-time equivalents, exceeds 50, your company falls under ACA’s definition of an applicable large employer.
Special Considerations: Seasonal Workers and Part-Time Employees
It’s important to note that the ACA recognizes the unique workforce dynamics of various businesses. For instance, there is a special rule for seasonal workers. Employers may not be classified as applicable large employers if they employ more than 50 full-time employees for only 120 days or fewer during the calendar year. This provision can be advantageous for businesses with clearly defined seasonal workforce needs.
Moreover, part-time employees play a crucial role in the calculation of full-time equivalents. For businesses with a mix of full-time and part-time employees, understanding how part-time hours contribute to the overall employee count is vital in assessing your compliance with the ACA.
Why Calculating Employee Count Matters
Understanding the ACA’s employee count calculation is not merely a matter of regulatory compliance; it’s essential for strategic planning, financial forecasting, and ensuring that your business can meet its obligations under the law.
As your company grows and your workforce expands, staying vigilant about your employee count and ensuring compliance with the ACA is key to avoiding penalties and maintaining a strong and legally compliant business. By accurately calculating your employee count, you can confidently navigate the requirements set forth by the ACA and contribute to the well-being of your employees and your organization.
To learn more about how Payroll Partners can help ensure that your business is in compliance with the ACA, call us at (817) 226-8111 or email us at info@payrollpartners.com.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.