Understanding the Affordable Care Act: What Employers Need to Know when Moving Above or Below 50 FTEs
The Affordable Care Act (ACA) has specific regulations that impact employers based on the size of their workforce. One of the most critical thresholds is 50 full-time equivalent (FTE) employees. Crossing this line, whether moving above or below, triggers changes in employer obligations, particularly concerning health coverage requirements, reporting duties, and compliance with additional labor laws such as the Family and Medical Leave Act (FMLA). Employers need to be proactive in understanding these obligations to avoid penalties and ensure compliance.
Understanding the 50 FTE Threshold
The ACA distinguishes between small and large employers based on whether they have 50 or more FTEs. Here’s what employers should consider:
Employers with Fewer Than 50 FTEs
To qualify for an HSA, you must:
• Not Subject to the Employer Mandate: Businesses with fewer than 50 FTEs are not required to provide health insurance to their employees.
• Mental Level Tiers: Coverage is offered in canned plans rated from Platinum to Bronze.
• Pediatric Dental & Pediatric Vision: These employers are subject to specific plan details for Pediatric members and their dental and vision services.
• Exemption from ACA Reporting Requirements: Unlike larger employers, small businesses do not need to comply with the ACA’s employer mandate reporting requirements.
Employers with 50 or More FTEs
• Subject to the Employer Mandate: Large employers must offer health insurance to at least 95% of their full-time employees (and their dependents) that meets minimum value and affordability standards.
• Reporting Requirements: Employers must file Forms 1094-C and 1095-C with the IRS to report coverage information. Generally, Forms 1094-C and 1095-C must be filed by February 28th if filing on paper (or March 31st if filing electronically).
• Potential Penalties: Failure to offer coverage or providing coverage that does not meet affordability standards can result in significant penalties under the Employer Shared Responsibility Provisions (ESRP).
Impact on the Family and Medical Leave Act (FMLA)
• Applicability: The FMLA applies to employers with 50 or more employees within a 75-mile radius.
• Employee Eligibility: Employees must have worked at least 1,250 hours over the past 12 months.
• Requirement: Employers must provide up to 12 weeks of unpaid, job-protected leave for qualified medical and family reasons.
Steps for Employers Moving Above or Below 50 FTEs
1. Monitor Workforce Size: Use the ACA’s FTE calculation to determine whether your business is approaching the 50-employee threshold. This includes assessing Common Ownership rules.
2. Plan for Compliance: If expanding above 50 FTEs, prepare for employer mandate requirements, reporting obligations, and possible FMLA coverage.
3. Assess Health Plan Offerings: Ensure any provided insurance includes the 10 essential health benefits and meets affordability standards.
4. Stay Updated on ACA Changes: Regulations evolve, and staying informed helps avoid penalties and ensure legal compliance.
5. Consult Experts: Work with HR professionals, legal advisors, and benefits consultants to navigate ACA compliance effectively.
Conclusion
Crossing the 50 FTE threshold under the ACA is a critical transition for employers. Whether moving above or below this benchmark, businesses must understand their obligations related to health insurance, reporting requirements, and employee benefits. Staying proactive in compliance efforts can help employers avoid costly penalties while providing quality benefits to their workforce. For businesses approaching this threshold, now is the time to review policies, consult experts, and develop a strategic plan to ensure a smooth transition under ACA regulations. Contact your Rose Street Advisors team if you have additional questions. If you are not a current client of Rose Street Advisors, please feel free to contact us at 269-552-3200 or contact@rosestreetadvisors.com to speak to someone.
Justine Dickens
EMPLOYEE BENEFITS ADVISOR
Justine is a devoted and meticulous team member with a passion to educate and support business partners and their employees. Since 2013, Justine’s commitment to her clients has allowed her to instill confidence and stability in the benefits packages offered to their employees. Her strengths allow her to communicate efficiently, focus on customization and understand the complexities of an ever changing industry. She is a Dale Carnegie Graduate and has her NAHU Self-Funded Certification.
When she is not working, Justine is busy running her son and daughter to their practices and games and volunteering in the community. She enjoys playing golf, hiking and spending time with her family and friends.