Under the Affordable Care Act, the employer mandate’s definition of an Applicable Large Employer (ALE) is the difference between an employer that is regulated by the employer mandate and an employer that is not. If the definitions implemented by the Affordable Care Act are not correctly understood, an employer may mistakenly believe the employer mandate regulations do not apply to its business.
Conversely, an employer may believe the regulations do apply when they do not. This is important because if your business is not an ALE, then you are not governed by the employer mandate regulations. Let us help you figure it all out.
The employer mandate’s ALE definition is a single employer that employs 50 or more full-time employees (or their equivalent).
To further define the ALE, apply the following basic steps:
- Define the employer.
- Define the full-time employee or equivalent (FTE).
- Calculate the number of FTEs.
These three steps will lead to the correct definition of what is defined as an ALE by the employer mandate of the Affordable Care Act.
To avoid an overload of complexity, we are only going to discuss the first two steps of defining the ALE. Just know that before you are completely defined as an ALE, you have to calculate the number of FTEs you employ. We will discuss the steps to calculating FTEs in a follow-up post.
An employer as defined under the provisions of 4980H of the Internal Revenue Code, employs on average at least 50 full-time employees (or their equivalent). Under the same provisions, a full-time employee is defined as (the following definition does not apply for tax credit purposes) an employee who provides on average at least 30 hours of service a week. In combination, these two definitions provide a more elaborate interpretation of the employer mandate’s definition of the ALE. To further define the ALE, we must also discuss how to calculate FTEs. This is the final step in deciding if your business is defined as an ALE under the regulations of the employer mandate. If you have any questions pertaining to the information presented in this blog, please contact us for further clarification.
Mario K. Castillo