Less than 50 Employees? ACA Reporting May Be Required

March 5, 2024

Less than 50 employees? You might think your business is exempt from the intricate web of the Affordable Care Act (ACA) reporting rules. However, certain situations could require your business—despite having fewer than 50 full-time employees or full-time equivalent employees (FTEs)—to align with ACA regulations. Understanding when and why your small or mid-sized business may still fall under these mandates reveals the critical importance of staying informed and prepared, ensuring compliance, and avoiding penalties.

Deciphering the ALE Criteria

Typically, the ACA’s employer mandate targets “applicable large employers” (ALEs), defined as businesses with 50 or more full-time or full-time equivalent employees. This criterion identifies entities obliged to offer affordable health insurance to their workforce or face significant fines imposed by the IRS. However, calculating whether your business qualifies as an ALE—and thereby subject to ACA’s reporting and coverage mandates—requires a nuanced understanding of what constitutes a full-time employee and an FTE.

A common misconception among smaller businesses is that falling below the 50-employee mark outright exempts them from these obligations. Yet, factors such as seasonal workforce fluctuations and specific employment arrangements can temporarily push employment figures above this threshold, inadvertently classifying a business as an ALE during certain periods.

The Impact of Seasonal Workers and FTE Calculations

Identifying your ALE status hinges on precise FTE calculations, considering both full-time employees and part-time staff contributions to your total workforce count. Notably, the inclusion or exclusion of seasonal workers can significantly affect this calculation. For instance, a spike in the employee count above 50 due to seasonal hiring doesn’t necessarily qualify a business as an ALE if this increase lasts for less than 120 days within the fiscal year.

Moreover, exclusions apply to specific worker categories like sole proprietors, partnership partners, and certain shareholders in S-corporations, underscoring the need for careful workforce assessment when computing FTEs and determining ALE status.

Navigating Complexity with Strategic Solutions

Even if your business skirts the ALE threshold, maintaining vigilance on ACA compliance remains paramount. Misinterpretations or miscalculations of your obligations could lead to unwelcome penalties. For businesses striving to navigate these complexities—whether on the brink of becoming an ALE or seeking voluntary compliance solutions—Tesseon offers personalized guidance and tools designed for each unique scenario.

Tesseon empowers smaller employers with customizable health reimbursement arrangements (HRAs) and stipend administration software, enabling flexibility while ensuring compliance. Through tailored strategies like Individual Coverage HRAs (ICHRAs) and Integrated HRAs, Tesseon ensures that companies can confidently provide competitive, compliant health benefits packages tailored to their teams’ diverse needs.

In essence, ACA compliance presents a multifaceted challenge for businesses of all sizes. For those under the 50-employee benchmark, understanding nuanced regulations and leveraging strategic solutions are key steps toward successful navigation. Partner with Tesseon for expert assistance in crafting a compliant, customized approach to health benefits, affirming your commitment to employee well-being while safeguarding your business against potential risks.

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