Why Employers Need to Count Employees

The following article was published by the IRS.

team of people in front of word staffIt’s important to know how many full-time employees you have because two provisions of the Affordable Care Act – employer shared responsibility and employer information reporting for offers of minimum essential coverage – apply only to applicable large employers. Employers average the number of their full-time employees, including full-time equivalents, for the months from the previous year to see whether they are considered an applicable large employer.

Whether your organization is an ALE for a particular calendar year depends on the size of your workforce in the preceding calendar year. To be an ALE, you must have had an average of at least 50 full-time employees – including full-time-equivalent employees – during the preceding calendar year. So, for example, you will use information about the size of your workforce during 2016 to determine if your organization is an ALE for 2017.

In general:

  • A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a calendar month.
  • A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.
  • An aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size.
    There are many additional rules on determining who is a full-time employee, including what counts as hours of service.

For more information, see the Information Reporting by Applicable Large Employers and the Employer Shared Responsibility Provisions pages on IRS.gov/aca.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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