Full-time Employee

A full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.

Full-Time Equivalent Employees

An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

  1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
  2. Divide the total by 120.

An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an ALE.  An ALE need not offer minimum essential coverage to its part-time employees to avoid an employer shared responsibility payment.  A part-time employee’s receipt of the premium tax credit for purchasing coverage through the Marketplace cannot trigger an employer shared responsibility payment.

Blue Cross Explanation – it seems verbatim

Basic ALE Determination Examples

Example 1 – Employer is Not an ALE

  • Company X has 40 full-time employees for each calendar month during 2016.
  • Company X also has 15 part-time employees for each calendar month during 2016 each of whom have 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 900 [15 x 60 = 900].
  • Dividing the combined hours of service of the part-time employees by 120 equals 7.5 [900 / 120 = 7.5]. This number, 7.5, represents the number of Company X’s full-time-equivalent employees for each month during 2016.
  • Employer X adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer X adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 90 [7.5 x 12 = 90].
  • Employer X adds those two numbers together and divides the total by 12, which equals 47.5 [(480 + 90 = 570)/12 = 47.5].
  • Because the result is not a whole number, it is rounded to the next lowest whole number, so 47 is the result.
  • So, although Company X has 55 employees in total [40 full-time and 15 part-time] for each month of 2016, it has 47 full-time employees (including full-time equivalent employees) for purposes of ALE determination.
  • Because 47 is less than 50, Company X is not an ALE for 2017.

Example 2 – Employer is an ALE

  • Company Y has 40 full-time employees for each calendar month during 2016.
  • Company Y also has 20 part-time employees for each calendar month during 2016, each of whom has 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 1,200 [20 x 60 = 1,200].
  • Dividing the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of Company Y’s full-time-equivalent employees for each month during 2016.
  • Employer Y adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer Y adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 120 [10 x 12 = 120].
  • Employer Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
  • So, although Company Y only has 40 full-time employees, it is an ALE for 2017 due to the hours of service of its full-time equivalent employees.

Additional examples can be found in section 54-4980H-2 of the ESRP regulations.

Learn More ⇒ IRS.Gov

Leave a Reply

Your email address will not be published.