ACA and full-time equivalency: What it really means
“Full-time employees.” The concept seems simple enough, but nothing ever is with the ACA. The forms are unclear, meticulous tracking of employee hours of service is often required, and tracking methods are complex.
Still, figuring out who qualifies as full-time is the first step to recognizing if you’re providing the correct insurance offers to the correct employees at the correct time. And there may be some aspects of “full-time” that you’re not considering.
Who qualifies for full-time?
Let’s say you own a law firm. There are 75 full-time employees, and one part-time employee. The part-time employee works 15 hours each week, every week of the year. In this case, figuring out full-time is easy. The part-time employee, since he is sure to put in less than an average of 30 hours of service per week—the ACA definition of full time—does not qualify, leaving you with just 75 full-time employees.
If you own a fast food chain, however, you might have three full-time employees and more than 150 part-time workers at any given time. Their hours vary weekly, there’s a lot of turnover, and you employ a number of extra seasonal employees during the summer. Who qualifies as full-time now for the ACA?
The three full-time employees, obviously, but a number of the part-time employees may qualify as ACA full-time as well. To figure out which ones, you need to measure employee hours of service, either through the monthly measurement method or the look-back measurement method, both prescribed under the employer-shared responsibility tax regulations.
How do I measure employee hours?
The most common way is the look-back measurement method. This is when an employer applies a measurement period of up to 12 months (most take all 12) and averages each employee’s service hours (holidays, leave, and paid time off all count—not just hours of work) each week.
If an employee’s average weekly hours of service are over 30 at the end of the measurement period, the employee qualifies as full-time under the ACA. If not, they’re ACA part-time, and do not need to be offered health insurance to avoid penalties, receive a 1095-C, or reported on. Doing this once every 12 months helps smooth out high numbers of hours during peak seasons, and can coincide with other annual business practices. However, each employer ultimately decides the length of measurement period they apply for employee tracking.
What else should I keep in mind?
Another hurdle you might miss in calculating the number of employees comes in the form of control groups. If your business was considered “large” by ACA standards before the act was put in place, or you had multiple businesses with some form of common ownership, you may be out of luck. Control groups are businesses with common ownership that may be counted as one employer under the ACA, and therefore need to total their full-time equivalent employees like everyone else.
Is that everything?
It’s a start. Compliance is sneakily hard: The ACA is more than 20,000 pages long. Even figuring out the number of people who qualify as ACA full-time—one of the first steps in this process—can seem like a hassle, but the alternative is heavy fines.
Although many people believed that the ACA would go away if they waited long enough, it’s here for the 2016 season, and will be from this point forward. Minimize the complication of reporting by making sure everyone knows their responsibilities, especially when it comes to what methods you’re using for tracking hourly and seasonal employees. It may only be the beginning of the process, but without maintaining the proper information and documents, it can be impossible to calculate your full-time employees and move forward. Make a plan, stick to it, and take a little bit of the hassle out of the ACA.