Knowing the exact number of full-time employees (FTEs) you have is essential in determining your payer status for Medicare and Medicaid services. Companies also need it in determining the number of employees under the Affordable Care Act, which will let you know if you are affected by the employer shared responsibility mandate - legislation that requires companies with 50 or more FTEs to offer a defined level of insurance coverage to their employees and dependents. It will also assist in knowing how to allocate the staff to specific jobs to help ensure efficiency throughout the organization.
According to the Internal Revenue Service, companies should consider all employees who worked during the given tax year when configuring the number of full-time employees. This includes those who terminated their employment during the tax year, those covered under a collective bargaining agreement and employees who do not seek enrollment in any type of health care coverage. A common way to find this information is by looking at the company payroll for the year. Businesses should not include the owner or sole proprietor of the company in the count.
Seasonal employees are not included in the count as a full-time employee unless they work for the company for at least 120 days. If a student works 60 days in the summer, comes back during breaks and works another 60 days during the same tax year, the company would include her in the count even though there was a break in employment. If the company paid insurance premiums on the student during employment, those premiums would be included in determining the amount of the health care tax credit at the end of the year, but the business would still not count the employee as full-time, so eliminate these employees from the payroll count.
According to the Affordable Care Act, a company should count any employee who works at least 30 hours in a week or 130 hours in a month as full-time. For employees who work variable hours, determine status by examining a prior payroll measurement period of three to 12 months. Employers may also include an administrative period of up to 90 days, but the combined periods can't exceed 30 days past the employees one-year anniversary. Count employees who work at least 30 hours per week during the measure period as full-time for a future period of time of at least six months but not less than the measurement period.
Initial Measurement Periods
Initial measurement periods can vary depending on when a business wants to start determining the count. Initial periods may start on the first day of employment or shortly after, including on the first pay period or after a probationary period. These initial measurement periods offer a stable time frame.
- Medicaid.gov: Affordable Care Act
- ADP: Determining Full-Time Employees Under the Affordable Care Act: Implications of Notice 2012-58
- Internal Revenue Service: Small Business Health Care Tax Credit: Questions and Answers: Determining FTEs and Average Annual Wages
- Internal Revenue Service: Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage
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