Affordable Care Act

The Basic Facts

Determining Applicable Large Employer Status

Employers may employ more than 50 full-time or part-time employees, collectively. In order to determine if a certain employer is subject to the Employer Mandate:

  • First, determine your total number of full-time employees — those working at least 30 hours per week or 130 hours per month — employed by the employers in the controlled group for each month in the preceding calendar year, and add those monthly totals together.
  • Second, for each month, add the hours worked by all part-time employees in the month (don’t count more than 120 hours for any one part-time employee), and divide by 120 to determine the number of “full-time equivalent employees” for the month. Then add those monthly totals together.
  • Third, add the monthly totals of full-time and full-time equivalent employees from steps one and two together, and divide by 12. Round any fraction down. This will determine the total number of FTEs. If the result is less than 50, the employer is not subject to the Employer Mandate. If the result is 50 or more, the employer is subject to the Employer Mandate.

The Employer Mandate only applies to full-time employees. Pursuant to the ACA, benefits must also be offered to the dependents of full-time employees. When counting FTEs, individuals who are not common law employees are disregarded, such as leased employees, partners, sole proprietors, more than two percent shareholders in subchapter S corporations, seasonal employees in some cases and bona fide independent contractors (as in those working through properly treated loan-outs).

When counting hours, the proposed rules would permit employers to disregard hours worked overseas, or hours for which an employee does not receive U.S. source income. FTEs can be divided into four categories. Full-Time, Part-Time, Seasonal and Variable Hour.