The IRS has released transition relief under the employer shared responsibility provisions for 2015 for the purpose of determining the average number of full-time employees that a company employs. This transition relief applies to the formula for determining total average number of full-time employees and for some plan sponsors this transition relief is a BIG deal – it defers play or pay penalty exposure (i.e., assessable payments) out to 2016.
Additionally, the regulators have identified a NEW category of employer for 2015 – the “mid-size” employer. As communicated in previous updates, controlled group rules apply when determining size of employer for the Affordable Care Act play or pay provision. Plan sponsors should take the time now to understand the process for determining employer size for the Employer Shared Responsibility penalties.
- Small employer: Companies that employ an average of 49 or less full-time (FT) employees.
- New – “Mid-size” employer: Companies that employ an average of 50-99 FT employees. No Play or Pay (4980H) penalties apply in 2015.
- Large employer subject to penalties under 4980H: For 2015 only, this is an employer that averages 100 + FT employees.
- Under transition relief, employers may select ANY six consecutive month period in 2014 to make a determination of company size for 2015.
ACA 2015 Employer Size Worksheet
1) Identify # of employees working 30+ hours ____ (x)
2) Total ALL hours in month for PT employees ____ (y)
3) Divide ALL hours for PT employees by 120: y / 120 = ____ (z)
4) Add FT to PT: x + z = ________ Full-time Equivalents
5) Complete this for each month (select 6 consecutive month period)
6) Total all months and divide by 6 ________ (average FT)
Note: When averaging hours for each employee, consider time off and whether it needs to be counted as hours of service for the individual. It is important to understand that the calculation illustrated above can be used to determine potential play or pay liability for 2015, however, it is not to be relied upon to determine company size for ACA premium rating purposes.
Please note that the information contained in this document is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.
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