Most organizations lack a thorough understanding of the IRS's controlled group regulations, which is necessary for this process. In order to prevent penalties for not accounting for aggregated ALE group members, best practices recommend collaborating with a professional in ACA compliance.

Employers sometimes lack well-defined full-time and part-time employee classifications, which makes determining ALE status difficult. Some have complicated workforces consisting of independent contractors, variable-hour workers, and seasonal employees. Furthermore, not all job titles correspond to the organization's set working hours. It goes without saying that determining ALE status can be challenging.

However, we are ready to assist if your organization is proceeding with determining ALE status independently. The several worker classes are described here, along with whether or not they should be taken into account for determining an employee's ALE status.

Full-Time Employees

To be considered a full-time employee, with the IRS, a person must work a minimum of 30 hours a week or a minimum of 130 hours a month. Here is a quick example:

There are 80 employees in Johnny Rad’s Pizza. Out of the 80 employees, 45 employees qualify to be full-time employees considering that they work for at least 30 hours per week or 130 hours per month. These 45 employees qualify to be full-time employees under ACA because they work an average of 30 hours per week or 130 hours per month. The full-time employees must be considered when determining ALE status.

Full-time Equivalent Employees

Those who are not considered to be full-time workers are considered to be among the list of full-time equivalent persons. They are not actually employees. Add all the hours worked by your part-time, variable hour, and your Seasonal employees to get the total number of full-time equivalent persons of your firm. In order to achieve this, the total number of work hours within a particular month is calculated among the non-full-time designated employees. Then, the total is divided by 120.

The number of full-time equivalents for a month is represented by this result. In order to determine ALE status for a month, you need to add this result to the number of full-time employees. ALE status for a particular year is determined by using a number of months from the previous year. After determining the counts for every month, figure out the average. Your company is an ALE for the following reporting year if the average is 50 or higher.

Part-Time Workers

Every week for an employee is uncertain due to fluctuations in the schedules of part-time and variable-hour employees. According to the ACA guidelines, an employee is said to be part-time if he or she works fewer than 130 hours in a month. Organizations have the freedom to offer health care to part-time employees; it is not an obligation as stated by the Affordable Care Act.

Seasonal Employees vs. Seasonal Workers:

As per the standards of the U.S. Department of Labor, a seasonal worker refers to an individual who lends their services or labor seasonally. For example, retail and farm workers who are employed during the holiday periods fall into the category of seasonal workers.

When evaluating an employee's ALE status, the IRS mandates that businesses take seasonal workers into account. Similarly, under the Look-Back Measurement Method, the IRS only classifies workers as seasonal employees when deciding whether or not they are full-time employees.

In this context, a seasonal employee is a person engaged for a role where the typical yearly employment period is six months or fewer and where the period of employment starts at roughly the same time of year each calendar year, such as summer or winter. An example of a seasonal employee given by the IRS is a lifeguard or a ski instructor.

With one exception, seasonal workers are also taken into account while assessing their ALE status. If an employer employs more than 50 full-time workers, including full-time equivalent workers, for 120 days or less in the previous calendar year and all of those workers were seasonal, the employer will not be deemed an ALE. This basically indicates that if a company employs a large number of seasonal workers, it will not be classified as an ALE.

Self-employed Individuals

Although they are not considered employees, independent contractors are frequently referred to as 1099 workers. Instead, they have per-service agreements with their employers. Independent contractors do not need to be included in your ALE calculations because they are not considered employees. Additionally, since these employees don't need benefits, your company doesn't have to offer them health insurance.

Seek Assistance for Employee Classifications

On the Employer Shared Responsibility Final Regulations, the IRS offers more details about the guidelines for identifying full-time employees. Use one of the two IRS-approved measuring techniques to determine an employee's hours if you're not sure if they work full-time or part-time.

Maintaining the integrity of your workforce depends on making sure that your employees are accurately classified. In addition to making it more difficult to comply with ACA regulations, incorrect classification can put your company at risk of state and federal legal action for breaking the rapidly growing equal pay rules.