Often referred to as “Obamacare,” the Affordable Care Act contains a mandate that requires all businesses with 50 or more full time equivalent (FTE) employees to provide health insurance to at least 95% of those employees and their dependents up to age 26. Businesses with 50 to 99 FTE will need to insure those workers by 2016. Businesses with 100 or more FTE need to insure at least 70% of those workers by 2015, and 95% by 2016. Failure to do so will result in a per-month, per-employee monetary tax penalty in the thousands of dollars.
Under Obamacare, a full time employee is defined as anyone working an average of 30 hours per week or 130 hours per month who works a minimum of 120 days during the year. Full time equivalent is determined by adding the number of full-time employees to the combined number of part-time employee hours worked and dividing by 30. There are three different ways in which hours can be counted.
- Actual Hours Worked– This includes the actual hours an employee worked and was paid for, as well as paid leave hours, per payroll records. For example, if an employee worked for 1000 hours and was paid for 40 hours of vacation, their total would be 1,040.
- Days Worked Equivalency– With this method, you credit an employee with 8 hours for each day they worked for a minimum of 1 hour. Therefore, if an employee came in Monday-Friday and worked only 4 hours each day, you would still credit them for a full 40 hours that week.
- Weeks Worked Equivalency– Under this method, an employee is credited for 40 hours of service each week that they worked, including any vacation weeks taken on paid leave. They are not credited for weeks in which they took unpaid leave.