Navigating ACA Compliance in 2024: A Guide for Applicable Large Employers (ALEs)

Meeting the obligations of the Affordable Care Act (ACA) is a considerable challenge for businesses, particularly those identified as Applicable Large Employers (ALEs). This status comes with a series of complex obligations requiring careful attention and ongoing management. Here’s an updated guide to help you determine ALE status, understand the employer mandate, and recognize the penalties involved for non-compliance in 2024.

How to Determine if You Are an ALE?

Determining your business’s status as an Applicable Large Employer (ALE) goes beyond a simple headcount of your full-time staff. Here’s a detailed look at how to make this determination:

The Evaluation Process

1. Full-Time Employees: Identify full-time employees defined as those working 30 or more hours a week.
2. Part-Time Employees: Calculate the impact of part-time employees using a specific formula. Add up the total hours worked by part-time employees in a month, divide by 120, and combine this figure with your full-time employee count.

This calculation gives you a blended total, and if it averages to 50 or more full-time equivalent (FTE) employees per month, your business will be classified as an ALE for the entire subsequent fiscal year. Constant vigilance in tracking and projecting employee numbers is critical for businesses near the ALE threshold to ensure compliance with ACA mandates.

What is the Calculation to Determine if You’re an ALE?

The detailed evaluation process for ALE status involves:

1. Identify Full-Time Employees: Count those working 30 or more hours per week.
2. Calculate Full-Time Equivalents (FTEs): Sum the total hours worked by part-time employees in a month and divide by 120.

For example, if part-time employees in a month work a total of 1,200 hours, that’s equivalent to 10 FTEs (1,200 ÷ 120 = 10). Add this to your full-time employee count to determine if you meet or exceed the threshold of 50 FTEs on average for the past year. Meeting this threshold classifies you as an ALE for the next year.

What is the Employer Mandate?

The employer mandate under the ACA requires ALEs to provide health insurance that meets specific minimum standards to at least 95% of their full-time employees and dependent children up to age 26, or face penalties. ALEs must also engage in detailed reporting to both the IRS and employees regarding the offered coverage.

What are the Employer Mandate Penalties for ALEs?

Understanding the penalties for failing to meet the employer mandate is crucial for ALEs:

Failure to Offer Coverage

If an ALE does not provide health coverage to at least 95% of their full-time employees and their dependents, and any full-time employee receives a premium tax credit to purchase insurance through the Health Insurance Marketplace, the ALE faces a significant penalty. For 2024:

• The penalty is $2,970 per full-time employee, excluding the first 30 employees.

Offering Inadequate Coverage

If an ALE offers health coverage that doesn’t meet ACA standards for affordability and minimum value, and any full-time employee receives a premium tax credit for Marketplace coverage, the penalty increases. For 2024:

• The penalty is $4,460 per full-time employee receiving the tax credit.

Late/Incorrect Reporting Penalties

• Employers face penalties of $310 for each Form 1095-C and $310 for each Form 1094-C not filed correctly or on time, totaling $620 per employee, or $630 if the failure is intentional.

Why Should Businesses Consider External Support for ALE and ACA Compliance?

Navigating ACA regulations and ALE status can be daunting. Partnering with knowledgeable advisors or leveraging robust HR systems can help manage healthcare benefits administration effectively. This not only aids compliance but also aligns business practices with broader objectives, such as promoting employee well-being and avoiding financial penalties. Tesseon offers direct support and solutions that address the full spectrum of compliance issues, from ALE determination to comprehensive ACA adherence and efficient payroll management.