If I have 50 full time equivalent employees when do I need to offer medical coverage to my employees and what else do I need to do?

For most groups, determining if they are an Applicable Large Employer (ALE) is done at the end of one calendar year to determine if they will be an ALE for the next calendar year.

For example, towards the end of 2024, an employer will determine if they averaged 50 or more full-time equivalent employees during 2024. If they did, then they will be an ALE in 2025. If an employer averages less than 50 full-time equivalent employees during 2024, then they would not be an ALE during 2025.

Please see the section on determining ALE status on the attached ACA Employer Guide starting on page 7.

 

If a group is involved in a merger or acquisition, then it is possible for them to become an ALE as of the date that the M&A occurred.

 

Also, if a new company starts up today, with 50+ employees, then they could be an ALE as of 1/1/2025, even though they did not average 50+ full-time equivalent employees during all of 2024. Instead, they could average 50+ full-time equivalent employees for their working days during 2024.


Here is the text from IRS Regulation §54.4980H-2 Applicable large employer and applicable large employer member.

(a) In general. Section 4980H applies to an applicable large employer and to all of the applicable large employer members that comprise that applicable large employer.

(b) Determining applicable large employer status.

1) In general. An employer's status as an applicable large employer for a calendar year is determined by taking the sum of the total number of full-time employees (including any seasonal workers) for each calendar month in the preceding calendar year and the total number of FTEs (including any seasonal workers) for each calendar month in the preceding calendar year, and dividing by 12. The result, if not a whole number, is then rounded to the next lowest whole number. If the result of this calculation is less than 50, the employer is not an applicable large employer for the current calendar year. If the result of this calculation is 50 or more, the employer is an applicable large employer for the current calendar year, unless the seasonal worker exception in paragraph (b)(2) of this section applies.

(2) Seasonal worker exception. If the sum of an employer's full-time employees and FTEs exceeds 50 for 120 days or less during the preceding calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days are seasonal workers, the employer is not considered to employ more than 50 full-time employees (including FTEs) and the employer is not an applicable large employer for the current calendar year. In the case of an employer that was not in existence on any business day during the preceding calendar year, if the employer reasonably expects that the sum of its full-time employees and FTEs for the current calendar year will exceed 50 for 120 days or less during the calendar year, and that the employees in excess of 50 who will be employed during that period of no more than 120 days will be seasonal workers, the employer is not an applicable large employer for the current calendar year. For purposes of this paragraph (b)(2) only, four calendar months may be treated as the equivalent of 120 days. The four calendar months and the 120 days are not required to be consecutive.

https://www.law.cornell.edu/cfr/text/26/54.4980H-2

 

In English, what this means is that each calendar year an employer needs to make a determination if they will be an Applicable Large Employer (ALE) for the next calendar year. An employer would look at their employee count in 2023 to determine if they are an ALE effective 1/1/2024. If they are an ALE in 2024, then by March 1, 2025, they are required to distribute Form 1095-C to their full-time employees, and by March 31, 2025, electronically submit Form 1094-C to the IRS along with copies of the Form 1095-C’s. 

 

For each month during 2023, the employer would determine how many full-time employees they had during the month. A full-time employee is someone who averaged working at least 30 hours per week during that month or worked at least 130 hours during that month.

They would also determine how many full-time equivalent employees. To make that determination, the employer would add up all of the hours worked by non-full-time employees, and divide by 120. If those part-time employees had worked 1,200 hours during a month, that would equal 10 full-time equivalent employees. [1200 / 120 = 10]

For each month they would add the full-time and full-time equivalent employees together to get that months total.

 

They do that for each month.

Then they add up the totals for each month and divide by 12, that provides the monthly average.

If the monthly average is 50 or greater for a calendar year, then they would be an ALE for the next calendar year.


What is a full time equivalent employee and what are the potential penalties if an employer is not meeting this expectation?

How to Calculate Full-Time Equivalent (FTE) Employees

To determine whether your business qualifies as an Applicable Large Employer (ALE) under the ACA, follow these steps:

Step 1: Count Full-Time Employees

• A full-time employee works at least 30 hours per week or 130 hours per month.

• Count all employees who meet this threshold.

Step 2: Calculate Part-Time Employees as FTEs

• Add up all the monthly hours worked by part-time employees (those who work less than 30 hours per week).

• Divide the total part-time hours by 120 to get the FTE count.

Step 3: Add Full-Time and FTE Employees Together

• If the total is 50 or more, your business is an ALE.

Example Calculation:

• 40 full-time employees

• 20 part-time employees working 80 hours per month each

• Total part-time hours = 20 × 80 = 1,600

• FTE count = 1,600 ÷ 120 = 13.3 (round to 13)

• Total employees = 40 full-time + 13 FTEs = 53 → ALE Status Applies

ACA Employer Penalties for ALEs

If an ALE does not comply with ACA requirements, they may face penalties under IRC Section 4980H:

1. “A” Penalty – Failure to Offer Minimum Essential Coverage (MEC)

• Applies if an ALE fails to offer health insurance to at least 95% of full-time employees and at least one employee receives a premium tax credit.

• Penalty in 2024: $2,970 per full-time employee (minus the first 30 employees).

Example:

• ALE has 60 full-time employees.

• Does not offer coverage.

• Penalty: (60 - 30) × $2,970 = $89,100 annually.

2. “B” Penalty – Offering Coverage That Is Not Affordable or Minimum Value

• Applies if an ALE offers coverage, but it is either unaffordable (costs more than 9.12% of household income in 2023) or does not meet minimum value (pays less than 60% of covered costs).

• Penalty in 2024: $4,460 per affected employee (only for those who receive a tax credit).

• Capped at the “A” penalty amount.

Example:

• ALE offers unaffordable insurance.

• 10 employees receive premium tax credits.

• Penalty: 10 × $4,460 = $44,600 annually.

What makes a business or employer an Applicable Large Employer (ALE)?

A business is considered an Applicable Large Employer (ALE) under the Affordable Care Act (ACA) if it has an average of at least 50 full-time employees (including full-time equivalent employees, or FTEs) during the previous calendar year.

Here’s what that means in detail:

• A full-time employee is someone who works at least 30 hours per week or 130 hours per month.

• Full-time equivalent (FTE) employees are calculated by adding up the total hours worked by all part-time employees in a month and dividing by 120.

• If the sum of full-time employees and FTEs is 50 or more, the business is an ALE.

Why Does ALE Status Matter?

If a business is an ALE, it must:

1. Offer affordable health insurance that meets minimum essential coverage to at least 95% of full-time employees and their dependents, or face potential penalties.

2. Report coverage details to the IRS using Forms 1094-C and 1095-C.

How to Request a Reduction in Your Medicare IRMAA Due to Life-Changing Events

If a Medicare customer is charged more due to the Income-Related Monthly Adjustment Amount (IRMAA), there are specific life-changing events that can be used to request a reduction or removal of this surcharge. These events include:

  1. Marriage: You got married and your combined income has significantly decreased.

  2. Divorce or Annulment: You got divorced or your marriage was annulled, leading to a decrease in your income.

  3. Death of a Spouse: Your spouse passed away, which reduced your income.

  4. Work Stoppage or Reduction: You or your spouse stopped working or had a significant reduction in work hours, leading to a lower income.

  5. Loss of Income-Producing Property: You experienced a loss of income-producing property due to a disaster or other event beyond your control.

  6. Loss of Pension Income: You or your spouse experienced a loss of pension income.

  7. Employer Settlement Payment: You or your spouse received a settlement payment from an employer or former employer due to the employer's bankruptcy or reorganization.

To request a reduction or removal of the IRMAA surcharge, you need to fill out and submit Form SSA-44, "Medicare Income-Related Monthly Adjustment Amount - Life-Changing Event." This form allows you to explain your life-changing event and provide documentation to support your request.

Would you like more details on how to fill out and submit Form SSA-44? Feel free to reach out to our office at 805 837 0175. 

Income-Related Monthly Adjustment Amount (IRMAA)

The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge added to your Medicare Part B and Part D premiums if your income exceeds a certain threshold. This means that higher-income individuals pay more for their Medicare coverage than those with lower incomes. The Social Security Administration (SSA) determines whether you owe IRMAA based on your Modified Adjusted Gross Income (MAGI) from two years prior, as reported on your IRS tax return.

The thresholds and additional charges are adjusted annually. As of 2024, for example, individuals with a MAGI above $97,000 (or $194,000 for married couples filing jointly) will pay an IRMAA in addition to the standard Medicare Part B premium.

Here is a simplified overview of how it works:

  1. Income Assessment: The SSA uses your MAGI from two years prior to assess your income. For example, in 2024, they will look at your 2022 income tax return.

  2. Income Brackets: If your income exceeds the established thresholds, you'll be placed into one of several higher income brackets, each with an increasing IRMAA surcharge.

  3. Premium Adjustment: Your Medicare Part B and Part D premiums are adjusted based on your income bracket, resulting in higher monthly premiums if your income is above the threshold.

Example Scenario:

  • If your 2022 MAGI was $120,000 (as a single filer), you'll fall into a specific income bracket for 2024, and your Part B premium will include an IRMAA surcharge in addition to the standard premium.

The primary purpose of IRMAA is to ensure that those who have a higher income contribute more towards the cost of their Medicare benefits.

How do HSA's work?

How do HSA’s work?

Health Savings Accounts (HSAs) are tax-advantaged accounts designed to help individuals with high-deductible health plans (HDHPs) save for qualified medical expenses. Here's how HSAs generally work:

Eligibility: To open and contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP). HDHPs have specific deductible and out-of-pocket expense limits set by the IRS.

Contribution: You and/or your employer can contribute money to your HSA up to the annual limit set by the IRS. Contributions are tax-deductible, meaning they can be deducted from your taxable income.

Tax Advantages: Contributions to your HSA are tax-deductible, and any interest or investment earnings within the account are tax-free. Additionally, qualified withdrawals for eligible medical expenses are tax-free.

Withdrawals: You can use the funds in your HSA to pay for qualified medical expenses, including deductibles, copayments, prescriptions, and certain other healthcare costs. It's essential to keep receipts and documentation for these expenses.

Portability: Unlike flexible spending accounts (FSAs), HSAs are portable. This means you own the account, and it remains with you even if you change jobs or health insurance plans.

Investment Options: Some HSAs allow you to invest the funds in the account, potentially allowing for growth over time. However, not all HSAs offer investment options, and it depends on the provider.

Age 65 and Over: Once you reach age 65, you can withdraw funds from your HSA for non-medical expenses without a penalty. However, if not used for qualified medical expenses, these withdrawals are subject to income tax.

It's crucial to be aware of the specific rules and regulations surrounding HSAs, as they can change, and individual circumstances may vary. Consult with a member on our team for personalized advice based on your situation.

Home Insurance

 What does homeowners insurance not cover?

Homeowners insurance usually doesn't cover certain types of events or situations. Common exclusions may include:

Floods: Homeowners insurance typically doesn't cover damage caused by floods. You may need a separate flood insurance policy.

Earthquakes: Similar to floods, earthquakes are often not covered by standard homeowners insurance. You might need a separate earthquake insurance policy.

Routine Maintenance: Regular wear and tear or maintenance issues are usually not covered. Homeowners are responsible for maintaining their property.

Sewer Backup: Damages resulting from sewer backups may not be covered, or coverage might be limited. You may need to purchase additional coverage for this.

Mold: Mold damage may not be covered, especially if it's due to prolonged neglect or poor maintenance.

Termite Damage: Damage caused by pests like termites is often considered a result of poor maintenance and is typically not covered.

Nuclear Hazard: Damage from nuclear events or war is usually excluded.

It's essential to carefully review your policy and discuss specific coverage needs with your insurance provider to understand the limitations and exclusions in your homeowners insurance policy.

Auto Insurance

Auto insurance typically does not cover the theft of personal property like a computer from your car. Auto insurance primarily covers damage to your vehicle and liability in case of accidents. If you want coverage for personal belongings stolen from your car, you would need to look into renters or homeowners insurance, which may offer coverage for personal property even if it's stolen from your vehicle. It's important to check your specific insurance policy to understand what is covered.