Content updated May 29, 2018
When 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:
- Active and retired service members enrolled in a U.S. Department of Defense health plan
- Any employee who as a spouse, survivor or dependent of an active or retired service member is enrolled in a U.S. Department of Defense health plan
Excluding these workers is permissible because of a law passed in July 2015 called the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. The provision in this law that amends the definition of an ALE traces to the Hire Our Heroes Act, a bill that U.S. Rep. Rodney Davis. (R-Ill.) introduced in 2013.
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 this ACA head-count exclusion can make
As is the case with other exclusions from the ALE head count, this exclusion can make a difference for businesses teetering on the 50 FTE threshold.
Excluding veterans from the ALE count can make a difference, – as shown in the whimsical example we give 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.
In this situation, the example centers on the effects of focused hiring for a Claus Resources company called Rent a Righteous Santa, a staffing firm that screens mall Santas and their Little Helpers.
We point out that Mrs. Claus, always concerned about Hollywood’s negative portrayal of a mall Santa, had directed Rent a Righteous Santa administrators to recruit veterans and their family members.
Through this recruiting effort, the company’s variable-hour workforce significantly grew by people who already were enrolled in a Veterans Administration health plan or one through TRICARE, the healthcare program for service members in the National Guard or Reserves.
By excluding these employees from the head count for Rent a Righteous Santa, the ALE tally dropped from 28,788 to 34. Though that reduction, huge as it is, did not affect the ALE status of Rent a Righteous Santa 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, N Squared Solutions, and ‘No Coal for You’ Studio.
With a combined ALE count of 99 rather than 28,853, Santa’s companies MUST comply with the Affordable Care Act for the current tax year.
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: