The Affordable Care Act and Employers: Why Workforce Size Matters

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.

Under the ACA, the size and structure of a workforce – small, or large – helps determine which parts of the law apply to which employers.doc exam

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.

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Brady Ramsay

About Brady Ramsay

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting. His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006. He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.