ACA math to check the need for compliance: Excluding owners from ALE count

ACA math to check the need for compliance: Excluding owners from ALE count

By Helen Karakoudas | ACA Education Director, Integrity Data

ACA for Santa example_owner exclusionWhen counting heads to see whether a business is large enough to need to comply with the Affordable Care Act, a company has to start by looking at the service hours of every worker.

But in the tally toward that all-important threshold for an Applicable Large Employer – 50 full-time employees, including equivalents – you can take some heads out of the ALE count:

  • Sole proprietors
  • Partners in a partnership
  • Shareholders in an S corporation with a 2% or greater share

Excluding these workers is permissible because ACA regulations do not define anyone with such ownership status as a full-time employee.

Time element for the ALE calculation

Employee head count is calculated for the workforce of the previous calendar year.

  • Add the number of full-time employees for each month of the prior year to the number of full-time equivalents for the prior year.
  • Divide the total by 12.

Differences that a head-count exclusion can make

ACA for Santa head count example_Integrity Data ACA ComplianceAs is the case with other exclusions from the ALE head count, excluding owners from the ALE count can make a difference for businesses teetering on the 50 FTE threshold.

For Tax Year 2015, it can also make the difference in another threshold – as shown in the whimsical example we use in our educational ACA for Santa video Confused about the Affordable Care Act and Whether Your Business Needs to Comply? Santa Is Trying to Figure This All Out, Too.

Santa companies ALE count_Integrity Data ACA ComplianceBy excluding the four partners – Santa, Mrs. Claus, the Easter Bunny and the Tooth Fairy – from the head count for intel provider N Squared Solutions, we brought the ALE tally from 18 to 14.

Though that reduction wasn’t significant for the compliance status of N Squared on its own, it did make a difference when the head count of this company was combined with head counts from the three other companies in the Claus Resources group: Shiny Nose Brigade, Rent a Righteous Santa, and ‘No Coal for You’ Studio.

With a combined ALE count of 99 rather than 103, Santa’s companies do have to comply with the Affordable Care Act for Tax Year 2015 but will be spared the risk of coverage penalties for what they did – or did not – offer employees in 2015.

That’s because, in early 2014, the IRS had pushed back the start of the penalty-assessment period for employers with 50 to 99 FTEs. Rather than it being January 1, 2015 – as it is for employers with 100 and more FTE – it is January 1, 2016.

Resources to simplify understanding of ACA compliance

To learn more about ACA compliance requirements for companies in the 50-99 ALE range,

  • Tune in to our second ACA for Santa video, When Your Company Has to Comply with the Affordable Care Act, Are You Sure of What to Do and by When? Santa Is Trying to Figure This Out, Too.

To learn about other exclusions that can be taken from the ALE head count – and its effects,

  • Find a high-level view in first ACA for Santa video, Confused about the Affordable Care Act and Whether Your Business Needs to Comply? Santa Is Trying to Figure This All Out, Too
  • Dig into the weeds with these blog posts:

                     ACA math to check the need for compliance: Excluding seasonal workers from ALE count

                     ACA math to check the need for compliance: Excluding veterans from ALE count

                     How can a company under 50 FTEs still be required to comply with the ACA?

For a live demonstration of quick-to-deploy, cost-effective ACA reporting software, sign up here: https://attendee.gotowebinar.com/rt/4928422701838350593

 

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