Determining if Your Business is an ALE for Reporting & Penalty Purposes

Posted September 22, 2017 by Megan DiMartino in Uncategorized | 0 comments

Unfortunately, the Affordable Care Act’s employer reporting and shared responsibility penalties have not been repealed, like many hoped. So small businesses that have grown in 2016 to fifty or more full-time/full-time equivalent employees have crossed over to an Applicable Large Employer (ALE) status and are subject to 2017 reporting and penalties.

5-step process to determine if your business is an ALE:

  1. For each month in 2016, count the number of employees who were employed to work, on average, at least thirty hours per week. This includes all full-time common law employees (including seasonal employees) who work for all entities treated as part of the same controlled group or affiliated service group.
  2. For each month in 2016, add the total number of hours for all other employees not counted in step one and divide each monthly sum by 120 – this will give you the number of full-time equivalent employees for each month.
  3. Add the monthly results of steps one and two to obtain the sums of each month of 2016.
  4. Average the monthly sums by adding them up and dividing by twelve (do not round up). If the result is less than fifty, then you’re not an ALE.
  5. If the result of step four is fifty or more, then you’re an ALE. BUT, if you had more than fifty employees for no more than four months during 2016 and you exceeded fifty in those months because you had seasonal employees, then you may not be considered an ALE.

Employer penalties to consider if you crossed the threshold status to ALE status:

  • Penalty A – if group health coverage was not offered to at least 95% of your full-time employees, and their children, and a full-time employee purchases subsidized Marketplace coverage for any given month, the employer will be subject to a penalty equal to $188.33 per full-time employee in excess of 30 for that month.
  • Penalty B – if group health coverage was offered to at least 95% of your full-time employees, and their dependents, and a full-time employee declined and instead purchased subsidized Marketplace coverage for any given month, the employer will be subject to a penalty for that month equal to the lesser of the Penalty A amount or $282.50 for each full-time employee with subsidized Marketplace coverage. An employee is able to purchase subsidized Marketplace coverage if they were not offered group health coverage that meets the minimum value and affordability tests by their employer.

Source: Jackson Lewis | Crossing the Threshold – Small Business to “ALE”

Links:
IRS Reporting Resources
Marketplace Coverage
Minimum Value & Affordability Tests

For more information contact info@crawfordadvisors.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.

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