Affordable Care Act and Employers: Why the Size of Your Workforce Matters

Affordable Care Act and Employers: Why the Size of Your Workforce Matters

If you are an employer, then it is essential that you familiarize yourself with all of the employer-related provisions of the Affordable Care Act. Among the most important are the rules that apply to your workforce – specifically how large it is and how it is structured. Many of the law’s provisions are only applicable to businesses of a certain size, which means that your business may be able to avoid certain obligations.

Is your business considered a large employer?

The key question regarding your workforce is how many full time or full time equivalent employees you had on staff in the previous tax year. The answer to this question determines whether for the current tax year your business is considered an ALE – an applicable large employer. ALEs are subject to two provisions of the Affordable Care Act, while those that are not large enough to be defined as ALEs are not. The provisions that are avoided by employers with fewer employees are the employer shared responsibility provision and the employer information reporting provisions. 

The specifics that define whether your business is an applicable large employer revolve around how many employees you have. Those who employee 50 or more workers on a full time basis (or full-time equivalent) are considered ALEs. That classification for the current tax year is based upon the number of employees from the previous year.

Making the calculation.

When calculating the number of full time and full time equivalent employees that your business had in the previous year, you need to determine the average throughout the year. This means that businesses are neither advantaged nor disadvantaged by workforce fluctuations. If your average number of these employees for the previous year totals fifty or fewer, then you have no obligation for either the employer shared responsibility provision or the employer information reporting provision.

Businesses whose employees number well over or under fifty employees need not worry about these calculations, but for those whose employee numbers fall close to fifty, it is essential that the workforce size calculation be done with care. The best way to arrive at the accurate number is to closely examine each month’s number of full time and full time equivalent employees for the entire previous year, add the full time number and full time equivalent numbers together, and then divide by twelve to arrive at the average for the year.

share this post
Search for matches...
Tom Gargiulo, E.A.

Tom Gargiulo, E.A.

Tom Gargiulo, E.A. is a tand Quickbooks accounting professional based in St. Petersburg, Florida. Tom is a Member of the National Society of Tax Professionals and has been Enrolled to Practice before I.R.S. since 1986. Specializing in Quickbooks Accounting, Consulting and Training, he has many QuickBooks certifications. National Tax, Accounting & Financial is a family business started over 25 years ago. If you could summarize our firm in one word, it would be "personalization". Our firm gets to know our clients as people and uses our personalized service to best meet their needs in all facets of our business. This translates into savings for our clients. We bring unique solutions to complex problems by applying years of experience and the latest technologies. We can assist you with your tax preparation and accounting needs.

National Income Tax & Accounting
16 reviews


Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

We know tax and accounting issues are complicated.

Do you have additional questions on this topic for this author?

Related Posts

Latest Posts