We are now officially in the year 2014. In less than one year the Employer Shared Responsibility Tax will be underway and Applicable Large Employers will be responsible to offer their Full-Time employees health care coverage or a pay a penalty tax on their behalf.
Applicable Large Employers are defined as an employer that employed 50 or more Full-Time equivalent employees throughout the preceding year. In this case, that means that we look at how many Full-Time equivalent employees the employer has throughout 2014. This is a monthly calculation that must be done by the employer. They determine the number of monthly Full-Time equivalent employees by taking the following steps:
1. Identifying Full-Time employees (anyone that works 30 or more hours a week or 130 or more hours in a month)
2. Aggregate hours worked by non-Full-Time employees
3. Divide aggregate hours by 120 to determine the number of equivalent employees
4. Add number of equivalent employees to the number of Full-Time employees that were identified
These steps will be followed each month throughout 2014. At the end of the year the number of monthly Full-Time equivalent employees will be averaged. If the average is 50 or more Full- Time equivalent employees, then the employer is considered an applicable large employer for tax purposes and will be subject to these new regulations. Trusted advisors should be vitally aware that their work begins now.