Employers need to make sure they are compliant with the Affordable Care Act (ACA) and the employer shared responsibility regulations, also known as “the employer mandate” or ALE. This means that employers must consider many factors when deciding between offering full-time vs part-time benefits, including the costs associated with providing health coverage and other employee benefits.
In this blog we’ll explore the differences between full-time (FT) and part-time (PT) benefits and why it matters for business owners.
What is the ACA’s Employer Mandate?
The Affordable Care Act’s (ACA) Employer Mandate is a federal law requiring businesses with 50 or more full-time employees to provide health insurance coverage to those employees, or face penalties. The ACA requires employers to offer minimum essential coverage that meets certain affordability and value requirements. Employers must also comply with certain reporting requirements so the government can keep track of employer compliance with the law.
The Employer Mandate is one of the most important elements of the ACA, as it helps ensure that more Americans have access to quality health care coverage. The goal of this law is not only to ensure that employers are providing health insurance to their employees, but also to make sure those plans are comprehensive and affordable.
The ACA’s Employer Mandate requires Applicable Large Employers (ALEs) to provide their full-time employees with affordable Minimum Essential Coverage (MEC), meeting Minimum Value (MV) requirements, that covers at least 95% of the workforce.
The Employer Mandate is enforced by the Internal Revenue Service (IRS), and while penalties can be imposed if an employer fails to comply with the law, there are some exemptions that may apply. For example, employers who offer health coverage but do not meet minimum value requirements may qualify for a “hardship exemption.” Additionally, employers with fewer than 50 full-time employees are not subject to the Employer Mandate.
What is ALE (Applicable Large Employer)?
Applicable Large Employer status is a designation given to certain employers by the Internal Revenue Service (IRS) under the Affordable Care Act (ACA). The ACA requires applicable large employers to offer health insurance coverage to their full-time employees or pay a penalty.
An applicable large employer is any business that has at least 50 full-time employees, or a combination of full-time and part-time employees that are equivalent to at least 50 full-time employees.
What Qualifies an Employee as Full-Time?
Generally, an employee is considered full-time if they work an average of 30 or more hours per week. Certain government agencies may have specific definitions to define full-time employees, such as those that qualify for unemployment benefits. Depending on the situation, an employee may also be considered full-time if they are classified as a salaried or exempt employee, meaning they would receive a set salary regardless of the number of hours worked.
Overall, being aware of an employer’s definition of full-time employment can be beneficial for both employers and employees. Knowing what qualifies as full-time can ensure that employees receive the correct benefits and employers are in compliance with any applicable regulations.
What Benefits are Generally Offered to Full-Time Employees?
Full-time employees typically receive benefits such as health insurance, vacation time, 401(k) plans, and other company-sponsored retirement plans. Some employers may also offer tuition reimbursement programs, life and disability insurance, flexible spending accounts (FSAs), and employee discounts. The specific benefits offered to full-time employees vary greatly depending on the employer and the industry.
Additionally, many organizations are now offering mental health support, remote working options and other perks that may benefit employees in these uncertain times.
Full-time employees must be offered benefits if the employer is subject to ALE, while part-time employees are not eligible for coverage until they meet certain hours thresholds. Employers should carefully consider how their benefits packages will affect the ACA and ALE compliance in order to avoid penalties or fines that could arise from noncompliance.
What Qualifies as Part-Time Employment and Benefits?
Part-time employment typically refers to a worker who is employed for fewer hours per week than a full-time worker. Some employers may offer part-time employees the same benefits as their full-time counterparts, including health insurance, paid time off, and retirement savings plans. However, there can be differences in the amount of benefits offered depending on the employer. For example, some employers may offer reduced health care plans or no retirement savings plan to part-time employees. In addition, some employers may cap the amount of paid time off for part-time workers. It is important for potential and existing part-time employees to know their rights under the applicable labor laws.
Additionally, employers need to be aware of the different rules for eligibility for full-time and part-time employees. For example, if an employer offers a health plan that is limited to full-time employees but also has part-time employees who work more than 30 hours per week, they may not be eligible to receive coverage under this plan. This means that employers must be very careful when establishing eligibility criteria for their benefits plans and make sure that they are compliant with the ACA and ALE regulations.
How PT vs FT Employee Benefits Impact Retention
Employers should also consider how their employee benefit packages affect their employee retention strategies. Offering attractive benefits to full-time employees can help retain them, while providing minimal or no benefits to part-time employees may lead to high turnover rates. Employers need to assess their workforce needs and determine if it is necessary to offer benefits to part-time employees in order to maintain a healthy and productive workforce.
Things to Consider
Overall, employers must take into account the costs of providing employee benefits, as well as the compliance requirements of the ACA and ALE when deciding between offering full-time vs part-time benefits. Employers should also consider their employee retention strategies and make sure they are providing adequate benefits to ensure long-term loyalty from both full-time and part-time employees. With proper planning, employers can create an effective benefits package that meets the needs of their workforce while remaining compliant with all applicable regulations.
The Affordable Care Act (ACA) requires employers to calculate the number of employees that qualify as full-time and full-time equivalent for each month in order to determine if they are an Applicable Large Employer (ALE). This calculation involves taking the total number of full-time designated employees, plus all non-full-time designated employees’ hours for the month and dividing by 120. The resulting number is then added to the full-time employee count to determine ALE status.
To ensure accurate calculations, employers can outsource their ACA compliance process to a service provider who will measure workers’ hours of service and calculate FTEs and ALE status on their behalf. Accurately calculating ALE status is essential for employers to minimize potential penalty exposure from the IRS.
To Sum It Up
The decision to provide full-time or part-time benefits to employees is a complex one that requires careful consideration of various factors such as cost, compliance with ACA and employer shared responsibility regulations. Employers should look into their options and evaluate which option is best for them in order to ensure they are providing their employees with quality benefits. Ultimately, offering the right benefits to employees can help businesses attract and retain talent.
If you’re a business owner that needs help navigating FT/PT employee benefits, reach out to us today!