As an employer, ACA compliance has likely been a looming concern since its inception many years ago. But how do you even know if you have to comply? Figuring out how many full-time equivalent (FTE) employees you have is a great start. In this blog, we’ll explain how to calculate FTE employees under the ACA.
ACA: A Quick Refresher
The Affordable Care Act (ACA) requires certain employers to offer health insurance coverage to their full-time employees or face penalties. To determine whether an employer is subject to these requirements, they must calculate their FTE employees. This calculation can be complex and confusing, but it is crucial for compliance with the ACA.
What is a Full-Time Equivalent (FTE) Employee?
An FTE employee is an employee who works an average of at least 30 hours per week or 130 hours per month. Part-time employees are counted as fractions of an FTE employee, based on the number of hours they work.
If the total number of FTEs is 50 or more, you will be considered an applicable large employer under the ACA (which means you are subject to ACA compliance).
How do I calculate the number of FTE employees for a given period?
To calculate the number of FTE employees for a given period, employers must first determine the total number of hours worked by all employees during that period. This includes both full-time and part-time employees.
Let’s break it down:
Step 1: Determine the number of full-time employees who work 30+ hours per week per month during the measurement period.
Step 2: Determine the total part-time and seasonal hours worked per week per month during the previous year and divide by 120.
Step 3: Add up the subtotals in steps 1 and 2, then divide by 12 to determine the number of FTEs.
Equation:
# of full-time employees + (# of part time hours per week, per month / 120) = FTE
Let’s add some real numbers to the steps:
Example:
40 FT employees + (1667 total PT hours monthly / 120) = 13.8 (round down to 13)
40 + 13 = 53 FTEs *Each month may vary so you will need to calculate each month’s FTE’s individually to determine FTE for the Standard Measurement Period.
IMPORTANT NOTE: An applicable large employer (ALE) for a calendar year is an employer who employed an average of at least 50 ‘full-time employees’ (including full-time equivalent employees) during the preceding calendar year.
How PrimePay can help ensure compliance.
At PrimePay, we are committed to making your business run more efficiently. Our ACA Compliance Navigator solution helps with variable hour employees, file and provide IRS Forms 1094/1095, and provides penalty exposure warnings, checklists and more.
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