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Before You Pay Or Play, You Need To Determine If You Are A Large Employer

Beginning 2014, employers who have 50 or more Full Time Equivalent employees (FTE) will be required to provide their full time employees with health care coverage that is deemed to be both affordable and adequate. If they don’t, they will pay a “shared responsibility” penalty. We have been conducting a series of seminars which analyze the requirements imposed by the federal government, and the decision points for employers to determine if they should continue to offer affordable and adequate health care coverage (Play), or choose to not continue to offer health care coverage, and be subject to the federal penalties (Pay).

In discussions of the rules and regulations concerning the determinations of what constitutes a large employer, questions concerning part time, seasonal and temporary workers are consistently raised. I will attempt to clarify those issues and outline how they may be used in the determination of a 50 or more employee group, also known as a large group.

To begin, the federal government regards an employee working 30 or more hours per week as full time. Part time employees working less than 30 hours per week are also used in the determination of the 50 or more employee requirement. However, employers are not required to offer health care coverage to that part time employee. In determining the FTE, the number of part time employees enrolled per month, times a maximum of 120 hours or actual hours if less, divided by 120 hours, results in a FTE. This FTE is added to the actual number of full time employees each month, and the sum averaged over the year will determine if the employer group has 50 or more FTE’s. An example of the calculation using part time employees is shown below.

ABC Manufacturing

Number of full time employees (2013):                                                      40
Number of part time employees (May – Sept):                                         30

Calculation of Aggregate Hours:

30 part time employees x 120 hours =                                                      3,600 hours
3,600 hours divided by 120 hours =                                                         30 FTE x each month
Add the FTE to the full time employees from May – Sept.                    40 + 30 = 70

Determining if ABC Manufacturing is a large employer:










ABC Manufacturing is considered a large group, and subject to the Pay or Play shared responsibility provisions.

There are special rules for seasonal employees. If ABC Manufacturing’s workforce exceeded 50 full time employees for 120 days or less during a calendar year, and those employees who exceeded 50 were seasonal, the employer would NOT be subject to the Pay or Play shared responsibility provisions.

It’s clear based on the questions raised at our recent seminars that these rules and calculations can be complicated. Ovation has dedicated resources available that understand the applications of the Pay or Play provisions, and can assist with en employer trying to make these determinations. Are you looking for guidance? If so, contact us at 800-364-7575.