A common question from employers, health insurance brokers, and CPAs is, "How do you calculate the number of full time equivalent (FTE) employees?"
That's because the Affordable Care Act's Employer Mandate (aka Employer Shared Responsibility Payments or the Play or Pay decision) only applies to "applicable large employers", defined as employing 50+ FTE employees.
The following steps will help you calculate the number of FTEs to determine if you are an applicable large employer.
Note: In 2015, the Employer Mandate only applies to applicable large employers with 100+ FTE employees. In 2016, the provision is expanded to employers with 50-99 FTE employees. There is no Employer Mandate for employers with less than 50 FTE employees. Read more about the Employer Mandate in 2015.
Calculating the Number of FTE Employees
For the purposes of determining whether your company is an applicable large employer, you must include all full-time employees plus the full-time equivalent of part-time employees.
For the majority of companies this is a simple calculation. For others, the calculation is more in-depth.
A full-time employee is defined as working on average at least 30 hours of service per week in a given month. How many full-time employees do you have?
Next, factor in part-time employees. To calculate the full-time equivalent of part-time employees, add the number of hours worked by part-time employees in a given month and divide the total by 120. How many full-time equivalent part-time employees do you have?
Finally, the sum of the full-time employees and the full-time equivalent of the part-time employees is the number used to determine whether your company is an applicable large employer.
Your company is not an applicable large employer if you employed less than 50 full-time employees on average during the previous calendar year, or employed more than 50 full-time employees no more than 120 days during the previous calendar year due to a seasonal workforce.
Worksheet: How to Calculate the Number of FTEs
Here is a worksheet outlining the above FTE calculations.
Now that you've determined if you're an applicable large employer... what's next?