Experienced Tax Accountant – Employers
that are considered “applicable large employers” are subject to the employer
shared responsibility provisions of the Affordable Care Act. In general, an
applicable large employer is an employer with at least 50 full-time employees
or an employer with both full-time and part-time employees whose hours add up
to the equivalent of at least 50 full-time employees.
In general, an applicable large
employer either must offer affordable health insurance coverage that provides a
minimum level of coverage to its full-time employees and their dependents or
make a payment to the IRS, if at least one of its full-time employees receives
a premium tax credit in connection with purchasing health care coverage through
the Health Insurance Marketplace.
The employer shared
responsibility provisions apply as of January 1, 2015. Employers should get
prepared and make decisions regarding health insurance coverage offered to
their employees. No employer shared responsibility payments will be due for
2014.
Full-time employees and
full-time-equivalent employees
Under the employer shared
responsibility provisions, a full-time employee is an individual employed on
average at least 30 hours of service per week, per month, or 130 hours of
service per month. The final regulations under the employer shared
responsibility provisions include much more information on the determination of
full-time employees.
A full-time equivalent employee
is two or more employees who are not full-time employees whose hours combined
are the equivalent to a full-time employee. An employer’s number of full-time
equivalent employees is only relevant to whether the employer is an applicable
large employer, and an employer need not offer coverage to part-time employees
who combine to result in full-time equivalent employees in order not to be
subject to an employer shared responsibility payment. For purposes of
determining whether an employer is an applicable large employer, two or more
part-time employees could equal one full-time equivalent employee. For
instance, two part-time employees each with 15 hours of service per week would
equal one full-time-equivalent employee.
Employers use information about
the number of employees they employ and their hours of service during 2014 to
figure if they have enough employees to be considered an applicable large
employer for 2015.
Special rules
Because an employer will be
calculating its number of full-time employees and full-time equivalent
employees for the first time for 2015, there is a transition rule intended to
make this first calculation easier.
Rather than being required to
use the full twelve months of 2014 to figure out if an employer has at least 50
full-time employees and full-time-equivalent employees, an employer may measure
during any consecutive six-month period as chosen by the employer during 2014.
This is most helpful to those employers who are near the 50-employee mark.
Additionally, employers with 50
to 99 full-time and full-time-equivalent employees in 2014 will not be subject
to an employer shared responsibility payment for 2015, if the employer meets
certain conditions described in the preamble to the final regulations under the
employer shared responsibility provisions. However, such an employer is still
required to complete information reporting for 2015.
There are various other kinds of transition relief available for
employers for 2015, described in the preamble to the final regulations under
the employer shared responsibility provisions. If you found this Tax
Tip helpful, please share it through your social media platforms.
Amare Berhie
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