ContactLocationsPrivacy Policy

 

EmploymentUpdates and News

February 2013

How to Calculate the Number of Employees for Purposes of the Patient Protection and Affordable Care Act

By Susan K. Chelsea, Esq.

Only applicable large employers are liable for penalties under the Patient Affordability and Affordable Care Act (“PPACA.”) Section 4980H(c)(2) of the Internal Revenue Code defines an applicable large employer with respect to a calendar year as an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees (“FTEs”)) on business days during the preceding calendar year. FTEs are a combination of employees, each of whom individually is not treated as a full-time employee because he or she is not employed on average, at least 30 hours of service per week with an employer. FTEs are counted as the equivalent of full-time employees solely for purposes of determining whether the employer is an applicable large employer.

The number of FTEs for each calendar month in the preceding calendar year is determined by calculating the aggregate number of hours of service for that calendar month for employees who were not full-time employees (but not more than 120 hours of service for any employee) and dividing that number by 120. Fractions are taken into account.

An “employee” is an individual who is an employee under the common-law standard, and an “employer” is the person that is the employer of an employee under the common-law standard. Under the common-law standard, an employment relationship exists if an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. It is not necessary that the employer actually direct or control the manner in which the services are performed.

To calculate the number of employees, the employer takes the sum of the total number of full-time employees (including any seasonal workers) for each calendar month in the preceding calendar year and the total number of FTEs (including any seasonal workers) for each calendar month in the preceding calendar year. The sum total of full-time employees and FTEs are divided by 12. If the result is not a whole number, it is rounded to the next lowest whole number. 26CFR section 54.4980H-2(b). If the result of this calculation is 50 or more the employer is an applicable large employer for the current calendar year, unless the seasonal worker exception in paragraph (b)(2) of section 54.4980H-2 applies.

The seasonal worker exception states that if the sum of an employer’s full-time employees and FTEs exceeds 50 for 120 days or less during the preceding calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days are seasonal workers, the employer is not considered to employ more than 50 full-time employees (including FTEs) and the employer is not an applicable large employer for the current calendar year.

For employers not in existence in the preceding calendar year, that employer is deemed to be an applicable large employer for the current calendar year if it is reasonably expected to employ an average of at least 50 full-time employees (taking into account FTEs) on business days during the preceding calendar year and it actually employs an average of at least 50 full-time employees, taking into account FTEs, on business days during the calendar year.

If you need assistance determining if your company qualifies as an applicable large employer, contact Susan K. Chelsea or Greg A. Garbacz at (619) 239-8131.

 

Klinedinst Employment Law Update

The opinions expressed in this employment update are general in nature, and are not meant to provide specific legal advice. For more information, please contact a Klinedinst attorney. No attorney/client privilege is created or assumed by reading this newsletter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Want to Receive California Employment Law Updates As Soon As They're Published?

 

 

 


Home | About | News | Practice Areas | Profiles | Careers | Locations | Privacy | Contact

Friend Klinedinst on Facebook
Follow Klinedinst on LinkedIn
Follow Klinedinst on Twitter

© 2013 KLINEDINST PC. All rights reserved.