How to determine if you are a large employer
As the Introduction to the Health Care Reform help document states, a "large" employer is defined as an employer who employs a minimum of 50 full-time employees or a combination of full-time and part-time employee that equals 50. A full-time employee is defined as anyone who averages 30 hours a week or more.
Employers will need to calculate how many full-time/full-time equivalent employees they have manually each year to know if they are subject to this provision for the next calendar year. So, in order to find out if you will be subject to the Shared Responsibility provisions for 2014, the employer must calculate how many full-time/full-time equivalent employees they had in 2013.
Now, lets go over how to calculate the average full-time employees you have working for you throughout the course of the year:
- Calculate each month individually
- Count how many active full time employees you had working for you each month
- Then add all of the hours paid to part-time/seasonal employee (this includes sick, vacation, PTO, bereavement, etc.) for the subject hours for calculating the full-time equivalent employees
- You only count the first 120 hours worked by each employee (so if a seasonal employee worked 180 hours in a month, only the first 120 hours would count toward the subject hours for the full-time equivalent employees
- After you have the subject hours for all the non full-time employees broken down per month, divide each month's subject hours by 120 to get the number of full-time equivalent employees you had during each month (make sure to round this number to two decimal places)
- Next, add your full-time employees to the full-time equivalent employees for each month to give you an accurate depiction of how many full-time/full-time equivalent employees you had working for you each month.
- Then, add up each months total of full-time/full-time equivalent employees to get an annual full-time/full-time equivalent employees.
- Take the annual figure and divide it by 12 to get your average number of full-time/full-time equivalent employees per month.
If this average comes out to be greater than 50 employees, you will be considered a "large" employer under then new Health Care Reform and will be subject to it's provisions.
So, about now you are making a list in your head of people or types of work hours that you believe should not be counted for a particular reason. Here is a list of individuals who would not be counted toward your status as a "large" employer:
- Leased employees
- Sole Proprietors
- Partners in a partnership
- Owners of an LLC taxed as a partnership
- 2% S-Corporation shareholders
Please also note that only hours worked within the US will need to be counted in determining if you are a "large" employer.
You can find out more about how to determine if you are a large employer by reading the IRS document "Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage".