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How do I know if my business is subject to Affordable Care Act penalties?


The new laws under the Affordable Care Act mandate that “large employers” (businesses that have 50 or more total full time equivalent employees) must provide “affordable” (affordable is no more than 9.5% of employees household income) health insurance coverage that provides “minimum value,” (MV = plan that pays 60% of total allowable medical costs) to all “full time employees” (those that avg 30 hours or more per week). Furthermore, the coverage must be made available to employees’ spouses and dependents; however, employers are not required to pay toward spouses’/dependents’ premium costs.

“Large Employers,” are businesses employing more than 50 “total full time equivalent” employees during a calendar year. “Full time equivalent” is calculated by first determining employees currently working less than 30 hours a week on average. Then run a report of the total monthly hours for each employee in this category. Take the total of all of these employees’ monthly hours and divide by 120. This figure is your “full time equivalent,” number of employees for a given month. Take the FTE and add it to your number of true full time employees to calculate your “total full time equivalent employees.” If this number is equal to/greater than 50 you are an applicable large employer and subject to penalties if you do not offer affordable coverage as of January 1st 2015. There is “transitional relief” for employers with between 50-99 total FTE.

Other important information is for those owners that have multiple companies all w/ less than 50 total FTE. According to IRS, “companies that have a common owner or are otherwise related generally are combined and treated as a single employer.” So, if your total FTE from all companies owned exceeds 50, you are considered a large employer and mandated to offer affordable health insurance. Likewise, if you have seasonal workers for more than 120 days or more than 4 consecutive calendar months they do count towards your total FTE. This article is not meant to replace the counsel of a licensed tax professional, attorney, or your health insurance agent.