How do I count employees to determine if I am required to offer coverage under the Affordable Care Act?

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Under the Affordable Care Act, employers with at least 50 full-time employees or a combination of full-time and full-time equivalent employees are required to offer health coverage (as explained on the large employer page). Here are the rules for counting employees to determine if you need to offer health coverage:

  • Employers take the average number of full-time employees and full-time employee equivalents in the preceding calendar year. If that number is 50 or greater, the employer is required to offer coverage. (To help businesses transition to the new regulations, the federal government is only requiring employers with 100 or more full-time or full-time equivalent employees to offer coverage.)
  • To determine the number of full-time equivalent employees, the employer adds up all of the hours worked by part-time employees in a month and divides by 120. That number is then added to the number of full-time employees. While part-time employees are counted for purposes of determining employer size, the requirement to offer minimum essential coverage applies only to full-time employees and their dependents. 
  • An employer is not considered to exceed 50 full-time employees if the excess is due to seasonal employees working for 120 days or less during the calendar year. If the employer did not exist in the preceding year, employer size is based on the average number of employees who are reasonably expected to be employed in the current calendar year.

For more information, please see our infographic, "Will Your Business Have to Pay a Penalty?"