After defining the employer and the full-time equivalent employees (FTE), the final step in defining an ALE is to calculate the total number of full-time employees and their equivalent by adding the total number of FTEs. To simplify, we broke the final step into two posts. In the first post, we discussed how to calculate the total number of FTEs by dividing the total hours of service of employees who are not full-time by 120. In this post, we will review the process of how to add FTEs to full-time employees to decide if your company is an ALE according to the employer mandate.
You may reference the first post on How to Calculate an FTE by clicking this link.
Remember, a difference exists between a full-time employee and a full-time equivalent (FTE), in this post we are combining the two to determine if your company is an ALE that is regulated by the employer mandate.
The process to determine the total number of full-time employees is laid out in 6 steps under section E. Calculating the Number of FT Employees 4980H of the Internal Revenue Code.
(1) Calculate the number of full-time employees for each calendar month in the previous year (an employee who provides at least 30 hours of service a week).
(2) Calculate the number of FTEs for each calendar month of the previous year (see first post).
(3) Add the number of full-time employees to the number of FTEs.
(4) Divide the sum by 12. This will result in the average number of full-time employees of the previous calendar year.
(5) If the result is less than 50, then the employer is not an ALE.
(6) If the result is 50 or more then the employer is an ALE.
For a mathematical example of how to combine full-time employees with FTEs in determining your ALE status, see this post. If you have any more questions in regard to the above post, please feel free to visit us or give us a phone call.