Must I Provide Health Benefits for my Employees?

The Affordable Care Act (ACA) makes health coverage a shared responsibility of individuals, employers, and the government to ensure that as many people as possible have affordable health insurance. While the law doesn’t require all U.S. employers to offer health insurance to their workers, employers, you have several ways to confirm if you qualify as an applicable large employer (ALE) and if you are obligated to provide health insurance benefits.

You must adhere to the ACA rules carefully, or you may face penalties for not providing employee health insurance if you were supposed to do so.

Careful Calculations

Let’s review key terms, so you understand what may apply to your company.

ALE

An ALE is a company with an average of 50 or more full-time?or full-time?equivalent?employees (FTEs). Even if you don’t have 50 full-time employees at all times, you must calculate your average number of FTEs during the previous calendar year. Employers must determine their ALE status each calendar.?

FTE

It is important to track your number of workers and their work hours to calculate your FTEs. Note the full-time equivalent qualification vs. what you may have considered full-time.

An employee qualifies as full-time on a month-by-month basis if they worked at least 130 hours of service for each month. However,?the FTE calculation is a way to standardize your headcount by combining your full and part-time workers’ hours to figure out how many full-time employees would work those hours.

You will convert?part-time and contract employee hours?into FTE unit employees by adding the total hours worked and dividing the total by whatever is considered full-time at your company. A typical U.S. company will likely adhere to the standard 40-hour workweek: eight hours per day, five days per week, but that isn’t universal, so adjust your FTE calculation accordingly.

For example, if a part-time employee works for 25 hours one week, their FTE value would be 0.625?(25 hours worked / 40 hours). If employees work a full 40-hour week, their FTE value would be 1.0 (40 hours worked / 40 hours).

Another example is if two part-time employees each work four hours per day for 10 days apiece during a weekly pay period, their 40-hour combined total represents 1.0 FTE on the company’s payroll for that pay period.

This calculation provides a convenient way to quantify how many theoretically “whole” full-time?equivalent?employees are on the?company payroll, even if most of your workforce is part-time.

ALE + FTE

You will add up your annual total of FTE hours and divide by 12 (months) to determine the average FTE hours per month. If you had an average of 50 or more FTEs during this calendar year (2022), you qualify as an ALE for the current calendar year (2023).

MEC

If you qualify as an ALE, you must?offer affordable health benefits that meet minimum essential coverage (MEC) or be subject to financial penalties.?

An employer-sponsored plan generally provides minimum value if it covers at least 60% of the total allowed cost of benefits expected to be incurred under the plan. However, the IRS uses different variables and MEC calculations that complicate determining MEC on your own. We can help you assess your MEC requirements.

ALE + FTE + MEC = Strauss

As you can see, understanding health care coverage can be complicated. At Strauss Insurance Service, we focus our expertise on insurance so you can focus on running your business. Reach out to us today to learn more.