The Affordable Care Act makes it a shared responsibility of individuals, employers and government to ensure that as many people as possible have health insurance. The law does not require all U.S. employers to offer health insurance to their workers. Rather, only employers defined by federal regulations as "applicable large employers," or ALEs, must make insurance available or pay a penalty.
- Full-time workers and "equivalents"
- Determining number of employees
- Requirement for covering employees
Full-time workers and "equivalents"
An applicable large employer is any company or organization that has an average of at least 50 full-time employees or "full-time equivalents" or "FTE." For the purposes of the Affordable Care Act, a full-time employee is someone who works at least 30 hours a week.
An FTE is any collection of two or more employees whose hours, when taken together, add up to a full-time workload of 30 hours a week. Two employees who each work 15 hours/week would represent one full-time equivalent, as would three 10-hour-a-week workers (3 x 10 = 30 hours = 1 FTE).
Determining number of employees
The definition of an ALE does not require a company to have 50 full-time employees or equivalents at all times. As long as a company has an average of 50, then it is an ALE.
In general, the average number of workers from the preceding year is the figure that counts. For companies that weren't in business the preceding year, a firm's status as an ALE is based on how many workers it is "reasonably expected" to have working "on business days."
Requirement for covering employees
Applicable large employers must offer their full-time employees the opportunity to enroll in a health insurance plan that provides minimum essential coverage. If they don't, they may be subject to a "shared responsibility payment," also called a Section 4980H penalty, after the section of the tax code that authorizes it.
The amount of the payment depends on several factors, including how many employees an employer has and how long it went without offering minimal essential coverage—all year, for example, or just a portion of the year. The penalties began in the 2015 tax year; however, employers with fewer than 100 workers were able to apply for "transitional relief," in which case the penalties didn't take effect until 2016.
Paperwork requirements for ALEs
Starting with the 2015 tax year, ALEs are required to send each full-time employee a copy of Internal Revenue Service (IRS) Form 1095-C. This form provides information about the health coverage the employer made available to the employee, including the cost and the months for which coverage was available. If the employer chose not to offer insurance to its employees, the 1095-C form will say so. The company must also transmit all Form 1095-C information to the IRS.
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