One of biggest sources of confusion and frustration with the Affordable Care Act is determining whether you are small group and exempt from the law or large group and subject to all the rules. At first glance it may seem black and white as 50 employees working over 30 hrs per week, is the threshold. But the catch in the law is that the 50 employee threshold includes part timers. They are called "full time equivalents" and their hours are tallied together to create and increase the number of employees an employer may have. Let's take a look at what a "full time equivalent" is and determine how you calculate the number of full time employees you have.
A "full time equivalent" is two or more part time employees whose hours total 120 hours in a month. For example , if you have 10 part time employees and 4 work 25 hours per week, 4 work 15 hours per week and 2 work 10 hours per week, you have 6 full time equivalent employees. How did we calculate that? The sum of all part time hours worked divided by 120
4PT EE's who work 25 hrs/week - 400 hours/monthly
4PT EE's who work 15 hrs/week - 240 hours/monthly
2PT EE's who work 10 hrs/week - 80 hours/monthly
10 PT EE's 720/120 = 6 FTE's
The full time equivalent employees are then added to your full time employee count. If the number of full time employees and full time equivalents is over 50, for 8 months or more you are a large group. If you have fewer than 50 employees 8 months of the year, you are considered small group and those months you are over 50 employees are considered seasonal.
For many employers this isn't of much concern as their full time employees and full time equivalents are well below 50. For many others who utilize a large number of part timers, this rule has been a challenge. The penalty for groups over 50 employees (including full time equivalents) not offering affordable insurance to at least 95% of eligible employees is the number of full time employees - 30 employees x $2,000. For example an employer with 54 employees not offering affordable coverage to 95% of all employees and full time equivalents, will owe $48,000 (54 -30 = 24 x $2k = $48k) if audited.
Calculating and understanding full time equivalent employees can be a bit tricky. As always, I am available to answer any questions or concerns you might have.
