A recent bulletin from the IRS provides a nice summary of how the number of employees determines the Affordable Care Act’s employer tax provisions.
An employer’s size is determined by the number of its employees.
• An employer with 50 or more full-time employees or full-time equivalents is considered an applicable large employer – also known as an ALE – under the ACA.
• For purposes of the employer shared responsibility provision, the number of employees a business had during the prior year determines whether it is an ALE the current year. Employers make this calculation by averaging the number of employees they had throughout the year, which takes into account workforce fluctuations many employers experience.
• Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
• Calculating the number of employees is especially important for employers that have close to 50 employees or whose work force fluctuates during the year.
Two provisions of the Affordable Care Act apply only to applicable large employers: the employer shared responsibility provision, and the employer information reporting provisions for offers of minimum essential coverage.
The IRS has posted more information on the Determining if an Employer is an Applicable Large Employer page on its website, IRS.gov/aca.