Another update from the HR jungle….
David is the HR director for his company. He’s attended seminars about the Affordable Care Act (ACA or Obamacare) but found most of the presentations confusing. He wasn’t sure what his company needed to do to comply with the law and, with all the delays in implementation, he moved this topic down his list of priorities.
Now David needs explain to the company owners what needs to be done to comply with the ACA. He knows the first step is to verify whether they are a “large” or a “small” employer. A large employer has at least 50 employees and is subject to an employer penalty if it doesn’t offer health insurance to its employees.
David’s company has 40 employees that work an average of 30 hours per week and so are full-time employees under the ACA. But his company also has 15 part-time employees.
How should David count the part-time employees under the ACA?
1. Add up the total hours worked during the month by the 15 part-time employees. Let’s assume that during the past month they collectively worked a total of 1260 hours.
2. Divide their aggregated hours by 120 (30 hours/week x 4 weeks = 120 hours per month). So David divides 1260 hours by 120. (1260 ÷ 120 = 10.5)
3. Round down to the nearest whole number. So David rounds down 10.5 to 10. During the past month the part-timers worked hours that are equivalent to 10 full-time employees. (That’s why part-time employees are called “full-time equivalents” or FTE’s).
4. Add the 10 FTE’s to the 40 full-time employees for a total of 50 employees. That means that in the past month, his company was a “large” employer under the ACA.
David should select 6 consecutive months in which to use the above formula to verify his company’s employer size. If during this 6 month counting period, the company has 50 employees, it is a “large” employer.
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