How to Determine If You Are An Applicable Large Employer?

If 50 or more Full-Time Equivalent Employees working in your company, then you are recognized as Applicable Large Employer (ALE).

According to the Affordable Care Act, an Applicable Large Employer has to provide health insurance to their employees for their safety.

Who are Full-Time Equivalent Employees?

A standard full-time employee is anyone who is working in an organization for at least 30 or more hours per week or worked 130 or more hours in one month. That each person is counted as a Full-Time Equivalent Employee (FTE).

As we all know, there are some employees in the company who work on a contract basis and are known as part-time employees. To calculate the full-time equivalent employees, you have to combine the service hours of part-time employees for a month. Then divide those service hours by 120.

Add this to your count of standard full-time employees so that you can get the total Full-Time Equivalent Employee for that particular month.

If you are an Applicable Large Employer, then you have to do this calculation of your Full-Time Equivalent Employee for each calendar month of the prior year.

After calculating it, add the total FTE count of each month together and divide it by 12 to get the average. If the result is 50 or more for last year, then you are an Applicable Large Employer for the next year too.

Seasonal Workers

There are also some seasonal workers that work for the company during certain times of the year. 

If an employer has more than 50 Full-Time Equivalent Employees for 120 days per year, then they can exclude seasonal workers from their full-time equivalent employee count.

But this is all legal when you are an Applicable Large Employer.

Special Rules for Companies Having Single Owner

Companies that are related to one another or have a single owner are joined and treated as a single company. This calculation will tell if you are an applicable large employer or not.

Sometimes the employers split the large companies into smaller fragments to avoid being an applicable large employer.

It means if you have 4-5 different companies with less than 50 employees, the companies are combined to find out the total employee count. This will ensure that the employer is an applicable large employer or not.

Rules for Company Controlled by Group of People 

Sometimes a company doesn’t have a single owner and is owned by a group of people which is known as ‘Controlled Group’. If that group of people also have ownership in other companies, then those companies are combined together to determine the employee count.

This helps in determining whether they are an applicable large employer or not.

Final Words

There will be changes in your business and the number of employees working for your organization from one year to the next. Therefore it is necessary to reassess your company’s employee count every year to find out if you are an applicable large employer or not.