An employer should make this calculation annually on or around January 1st, by evaluating its average employee group size in the preceding calendar year.
For each month of the preceding calendar year, the employer calculates:
(Number of Full Time [FT] employees) + (Number of Full Time Equivalent [FTE] employees)
Then, the employer will calculate an average of all 12 months’ results:
(Sum of each month’s results) ÷ 12
If the employer has a result of 50+, then the employer is an ALE for the entire new calendar year. This means, the ALE must comply with the ACA’s employer mandate in the new year, and must later report offers of employee coverage to the IRS at the beginning of the next calendar year.
The employer remains in the ALE (or non-ALE) category for the entire year, regardless of group size fluctuations throughout the calendar year.
Sample ACA Timeline
In January 2024, the employer counts FT + FTE employees for each month of 2023. Then, the employer averages the count of all 12 months. If the employer has a result of 50+ FT + FTE employees, it is an ALE for all of 2024, and must comply with the ACA’s employer mandate for the entire year.
SAMPLE CALCULATION:
- January count = 78 FT + FTE
- February count = 61 FT + FTE
- March count = 63 FT + FTE
- April count = 59 FT + FTE
- May count = 59 FT + FTE
- June count = 57 FT + FTE
- July count = 52 FT + FTE
- August count = 49 FT + FTE
- September count = 48 FT + FTE
- October count = 48 FT + FTE
- November count = 51 FT + FTE
- December count = 47 FT + FTE
(78 + 61 + 63 + 59 + 59 +57 + 52 + 49 + 48 + 48 + 51 + 47) ÷ 12 = 56 FT + FTE employee.
In this scenario, the employer averaged 56 FT + FTE employees for all months of 2023. Thus, it is considered an ALE for all of 2024. The ALE must therefore offer all eligible FT employees affordable Minimum Essential Coverage (MEC) that provides Minimum Value (MV) [including at least MEC for dependent children to age 26] in 2024.
Then, in Q1 of 2025, the ALE employer must report on its compliance (or non-compliance) with the employer mandate to the IRS for the 2024 year. Also, on January 1st of 2025, the employer re-starts the process by evaluating its group size again, looking back on the 2024 year. And the cycle continues.
Refer to Word & Brown’s exclusive ACA Group Size calculator for help in making this annual determination.