Here's a quick overview of the employee counting rules:
What constitutes a full time employee?
Any employee that works at least 30 hours per week is considered to be a full time employee under these new regulations.
What is a full time equivalent?
This is where calculating an accurate employee count can cause some confusion. In addition to including full time employees in the employee count for group health insurance, a portion of your part time employees may also need to be included. This is what is referred to as full time equivalents.
To calculate the number of full time equivalents, you take into account the number of part time employees that have worked less than 30 hours per week but more than 120 days per year. You will include the number of employees that fall into this category in a formula that was published by the federal government to determine the total number of part time hours worked across your employee pool. This will then reveal how many full time equivalents that your company actually has.
To make it easier for employers to calculate the number of full time equivalents that they have, they can take advantage of the FTE calculator tool found on healthcare.gov.
Who should not be included in your employee count calculation?
Outlined below are individuals that should not be a part of your full time equivalent count calculation:
- Owners of a sole proprietorship
- Shareholders owning more than 2 percent of an S corporation
- Owners of more than 5 percent of other businesses
- Family members or household members who qualify as dependents on the individual income tax return, including a spouse, child (or decedent of a child), sibling (or step-sibling), parent (or step-parent or ancestor of a parent), niece or nephew, aunt or uncle, son-in-law or daughter-in-law, mother-in-law or father-in-law, brother-in-law or sister-in-law
- Seasonal employees working 120 days or less in a year
- Independent contractors (form 1099 workers)
- COBRA and retired enrollees
Having an accurate understanding of your employee count will not only help you avoid some steep penalties from not being in compliance with the Affordable Care Act, but it also will categorize you as a small or large employer.
A small employer is a business with fewer than 50 full time employees, and a large employer is a business with 50 or more full time employees and full time equivalents.
Understanding which category your business falls into is critical as it will determine which regulations your business is subject to, which penalties may or may not apply, whether you could be eligible for tax credits, and whether your company qualifies for the SHOP marketplace.
As you can see, there are a lot of moving parts when it comes to determining your employee count and how it affects your company’s health insurance options. That's why it's so important that you seek the help of a professional benefits consultant who specializes in ACA compliance and employee benefits, such as Summerlin-Roberts. We are accredited with the Federal Marketplace as a SHOP broker and can ensure that your business meets these requirements accurately. Please contact us to learn more.