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The Language of ACA

When then-majority leader Nancy Pelosi said “we have to pass the bill [Affordable Care Act, or ACA for short] so you can find out what is in it,” she wasn’t kidding.

The law, which is now more than Dreamstime.com - <a href="https://www.dreamstime.com/royalty-free-stock-photos-d-human-character-questions-image-illustration-image32803098#res2965056">3d human character questions</a> 6 years old, contains confusing terminology that we’re still trying to decipher.

What’s more, there are significant conflicts in the terms used for ACA compared with other federal laws.

Here are some examples … and hopefully some clarity.

Full time

The meaning of the term “full time” is essential for ACA because it is used for determining Applicable Large Employer (ALE) status. An ALE is subject to the employer mandate to offer health coverage or pay a penalty (“play or pay”) and to report annually about health coverage to full-time employees and the IRS.

  • For ALE status. A full-time employee is someone who has on average at least 30 hours of service per week during the calendar month, or 130 hours of service during the calendar month.
  • For FLSA. In contrast, under the Fair Labor Standards Act, which requires overtime pay for non-exempt workers who exceed a time threshold, “full time” means 40 hours per work week.

Full-time equivalent employees

The term “full-time equivalent (FTE)” is used to determine ALE status as well as eligibility for the small employer health insurance credit.

  • For ALE status. Combine the number of hours of all non-full-time employees for the month (but no more than 120 hours per worker), and divide by 120. This number is added to full-timers to determine whether an employer has 50 or more (full-timers and FTEs), making the employer an ALE.
  • For the small employer health insurance credit. Combine the hours of full-time employees (but no more than 2,080 per employee per year) with the hours of part-timers. Then divide by 2,080. If necessary, round down to the next whole number to find the number of FTEs.

Seasonal staff

Many businesses hire help for a limited time during the year. It may be a golf school in the summer months, ski instruction in the wintertime, or additional workers for retailers during the holiday season. Under ACA it’s important to know whether this staffing counts toward ALE status and triggers other requirements. ACA has two distinction terms used for such staffing:

  • Seasonal employee. This term is used to determine whether an employer is required to make an offer of health coverage. It means someone who works full- or part-time for 6 months or less and is designated at time of hire as seasonal.
  • Seasonal worker. This term is used to determine whether an employer is an Applicable Large Employer (ALE). A seasonable worker is someone who works no more than more than 4 months or 120 days during the prior calendar year.

Small employer

Under ACA, being “small” is a big deal. It means exemption from the employer mandate. And it can also mean eligibility for the small employer health insurance credit.

  • For ALE status. “Small” means fewer than 50 full-time and FTE employees.
  • For the small employer health insurance credit. It means fewer than 25 FTEs.

Conclusion

Don’t assume that a term used for one law applies to another. Still confused? Work with a knowledgeable professional who can make sure that you’re applying the correct terminology to the matter at hand.

3 comments

  1. Jamie Schutzer 1 December, 2016 at 08:51 Reply

    I have another one specific to NY State…the small group insurance market is defined as 1-100 FTE’s but employers with 50 or more FTE’s are an ALE subject to the large group employer mandate. Therefore, NY employers with 50-100 FTE’s are both small and large employers depending on where it is being applied.

  2. Nuance Financial 6 December, 2016 at 11:59 Reply

    This is an AMAZING helpful and clearly rendered down description of some of the affordable care act core tenants. It’s really unfortunate that a massive bureaucracy like the ACA is yet another barrier for entrepreneurship. What we’ve been finding is that our young people either: 1. are totally in the dark that entrepreneurship exists and that a liberal arts degree might not be the most efficient career path anymore. 2. People are so fearful of the litany of taxes, red tape and bureaucracy around starting a business that they are afraid; the already risky endeavor carries with it the stigma of being 10 times more risky than it really is. 3. Entertainment is killing the nation’s ambition to create and implement new entrepreneurship endeavors. sitting around looking at cat memes kills the boredom where autonomous ideas used to be incubated.

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