The employer mandate provision in the ACA applies to entities that employ a total of 50 or more full-time (i.e., 30 or more hours of service per week) or Full-Time Equivalents (FTEs). In other words, if Full Time + FTE is 50 or more, the mandate applies.
If an employer has fewer than 50 full-time employees and also have part-time employees who work fewer than 30 hours per week, the number of FTEs employed must be calculated to determine if the mandate applies.
To calculate part-time employee hours into FTEs:
- Step one: calculate the total hours of service in a month for employees who are not full-time employees for that month. (This number cannot exceed more than 120 hours of service for any employee.)
- Step two: divide the total hours of service from step one by 120.
The result is the number of FTEs for that month.
Note: The determination of mandate applicability for self-funded employers is made retrospectively - employees are counted in 2013 to determine status for 2014. The proposed regulations provide a transition rule that allows employers to choose any period of six consecutive months in 2013 (rather than the entire year) to determine their status in 2014.
Note that there is a specific exception for seasonal employees that applies to certain employers.
Guidance via an IRS Notice describes safe harbor methods that employers may use (but are not required to use) to determine full-time status for ongoing and new employees, including variable hour and seasonal employees. The guidance in IRS Notice 2012-58 will be valid at least through the end of 2014. Details on this notice are available here.
For additional questions and advise on this topic, please consult with an attorney or tax advisor to verify the impact on your company.