The First Year as an Applicable Large Employer

When the Internal Revenue Service was developing the regulations addressing the Employer Shared Responsibility requirements, they received a number of comments from small employers that were nearing the 50 full-time/full time equivalent employee threshold of an Applicable Large Employer (ALE).These employers explained the difficulty in calculating their ALE status when information coming in the final months of the calendar year could affect their status and leave them with little time to act, if they ended up qualifying as an ALE.

To address these concerns, the final regulations state that an employer will not be subject to the shared responsibility payment with respect to an employee under §4980H(a) (Part A Penalty”) for January through March of the first year they are an ALE if they offer the employee coverage on or before April 1 of the first year the employer is classified as an ALE. The employer will not be subject to the shared responsibility payment §4980H(b) (“Part B Penalty”) with respect to an employee for January through March of the first year if they offer the employee coverage that provides minimum value.

If an employer doesn’t offer coverage by April 1, they may be subject to both the Part A and Part B penalties for any month after January that coverage is not offered during that first year.

This rule only applies during the first year in which an employer is an ALE. The relief is not available if the employer falls below 50 full-time employees and meets the ALE threshold again in future years.

We hope this information was helpful! To learn more about outsourcing your benefits administration, including compliance to Gravie, email us at info@gravie.com or call us at 844.540.8701.

Sue Eaton is a compliance officer at Gravie. She’s responsible for making sure the services and products we offer comply with state and federal laws. Because we understand the importance of compliance and staying on top of ever changing rules and regulations, Sue contributes her wisdom regularly to the Gravie Blog. Check out her other posts Square Peg in a Round Hole – Compliance in the Modern World of Health Insurance, HIPPA & MARS-E Compliance. and Tracking the Small Business Health Care Relief Act of 2016: Why it Matters.