Are you close to becoming an Applicable Large Employer (ALE) or are you unsure how to determine whether or not you qualify? If so, you've come to the right place. Gravie helps employers determine ALE status and walks them through the steps they need to take if they become an ALE to help them avoid penalties they could be subject to. This post provides a brief overview of what employers should know if they become an ALE mid-year.
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 firstname.lastname@example.org 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.