This is the starting point for every company concerned with the Affordable Care Act. ALE stands for Applicable Large Employer; these are companies with an average of 50 or more Full-time & Full-time Equivalents (FTEs) on business days in the previous calendar year (January-December). If an employer is not an ALE for the current year, they are not responsible for any §4980H penalties. Every ALE Member is required by law to report coverage summary information to the IRS, even when no coverage was offered.
Step 1, an employer must determine its number of full-time employees for each calendar month. To be crystal clear, there is no trick to this measurement. Employers will use the actual hours of service accumulated by its workforce. A full-time employee is an employee who has worked 30 or more hours of service per week.
An “hour of service” is each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer, and each hour for which an employee is paid, or entitled to payment, for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (disability), layoff, jury duty, military duty, or leave of absence.
Step 2, an employer must determine its number of full-time equivalents (FTEs) for each calendar month. To do this, all of the hours of service by non-full-time employees are aggregated together. The number most likely will not be a whole number, because of this, employers are permitted to round to the nearest hundredth when determining their FTE number per month.
By this point, you can hopefully see that data is paramount. There is an easier method for determining the total FT + FTE count at the same time:
⦁ First, cap all employees to a maximum of 120 hours per month
⦁ Then, sum the total hours for all employees each month
⦁ Next, divide each month’s total by 120 hours
⦁ Finally, average the twelve months
*This average is your FT + FTE count for the next ensuing year.
Whether an employer is an ALE or not for the current year is simply a “Yes” or “No” status; however, it is still possible for an employer to be roped into an ALE Status of “Yes” by common ownership with other employers. Employers must consider all other companies with whom they share common ownership when determining their ALE status. This is what’s known as an Aggregated ALE Group Member.
For example, if a small food chain was part of a larger corporation and the ownership percentages were right (there are a lot of regulations on this, but we suggest they consult with legal counsel) then all of the small chains would each be considered an Applicable Large Employer, despite them having less than 50 FT + FTE employees on their own. With all of this said, the burden of responsibility solely rests on the shoulders of the individual employer, not the parent company.