By Helen Karakoudas | ACA Education Director, Integrity Data

ALE – the acronym for “Applicable Large Employer” that we keep hearing for companies required to comply with the Affordable Care Act – can pack meaning that is just as serious for smaller businesses.

ACA for Santa_combined ALE count_Integrity DataIf a company with under 50 full-time employees (including equivalents) is related to companies that meet IRS rules for being commonly controlled or affiliated, that company is an ALE Member of an ALE Group.

This fine-tuning of the ALE definition means that Affordable Care Act compliance requirements apply to every ALE Member – even when that company has nine full-time employees.

Santa companies ALE count_Integrity Data ACA ComplianceSuch is the case for Shiny Nose Brigade, the smallest of Claus Resources companies featured in our whimsical example of ACA compliance must-knows for Santa. (See our 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.)

IRS Controlled Group Rules_Integrity Data ACA ComplianceOn its own, Shiny Nose Brigade – like N Squared Solutions, Rent a Righteous Santa, and ‘No Coal for You’ Studio – does not have the head count to be an ALE.

If they were not related, compliance requirements of the Affordable Care Act would not apply to any of these companies. But because their combined head count is over the 50 FTE threshold for ALE status, the Affordable Care Act applies to each of these companies in the U.S. operations of Claus Resources.  

When are ALE head counts combined?

Santa companies_Integrity Data ACA ComplianceRules for determining whether companies are commonly controlled or affiliated – and therefore required to be be treated as one – are found in Section 414(b), (c), (n) and (o) of the Internal Revenue Code. Controlled Group Rules, aka 414 Rules, boil down to the three following questions:

  • Do the companies have owners in common?
  • Do the companies provide services to one another?
  • Together, do the companies provide services to others?

A “Yes” to any of these questions means that the companies do meet IRS criteria for Controlled Group Rules.

ALE Group definition_Integrity Data ACA ComplianceIn the case of Claus Resources companies, the answer is “Yes” to all questions: Not only are there common owners with Santa and Mrs. Claus, these companies serve one another AND together they serve other parties.

With a combined head count of more than 50 for the U.S. operations of Claus Resources, it no longer matters that each of the four companies does not, on its own, classify as an Applicable Large Employer.

Because they are related to the point of being considered a group – and the group classifies as an Applicable Large Employer, they each are required to comply with requirements of the Affordable Care Act – or face penalties.

With the group’s ALE status being under 100, in its compliance for Tax Year 2015, companies in the Claus Resources group will be spared the risk of coverage penalties for what they did – or did not – offer employees in 2015. This grace period dates to early 2014, when the IRS had pushed back the start of the penalty-assessment period for employers with 50 to 99 FTEs. Rather than that it being January 1, 2015 – as it is for employers with 100 and more FTEs – it is January 1, 2016 for employers with 50 to 99 FTEs.

Resources to simplify understanding of ACA compliance for companies under 50 FTEs

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 exclusions that can be taken from a company’s ALE head count,

  • 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 owners from ALE count

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

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

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