Simplify the ACA Equation

Friday, September 25, 2015

The Affordable Care Act (ACA or “Obamacare”) could mean some big changes for many businesses. Under the law, you may be required to provide your employees with a qualified level of insurance coverage. This requirement is determined by the number of full-time equivalent employees (those who work 130 or more hours each month) within your organization.

Coverage and Deadline (Based on Full-time Employees/Full-time Equivalents)


The basics may seem straightforward, but until you grasp the meaning of FTE, it can be quite confusing. The law states that FTEs are those employees who work 130 hours or more per month. However, part-time employee hours are also part of the calculation, as a fraction, and are included in the overall total.

Define the status of your employees by placing them into the following buckets:


Now calculate your total FTEs. Your equation is based on how many full-time employees you have, plus part-time employees whose combined hours equal a full-time employee. Note: While 130 is the threshold for determining if an employee is considered part-time or full-time, variables associated with part-time employees’ work schedules and the number of work days in the month require you to divide by 120 for the equation.

Here is the equation:

Confusing? Totally understandable. So here’s an example:

Barry’s first task is to figure out the number of equivalents coming from his part-time employees by adding the number of hours each of them work in a month (330, in this example). Then he needs to divide that number by 120.

The magic number for Barry is 2 FTEs (for his part-time employees) since ACA rules instruct you to round down in this calculation.

Since seasonal employees are excluded from the equation, Barry then adds the 2 FTEs (from the calculation) to the 4 full-time employees, resulting in a total of 6 FTEs.

Since Barry has less than 49 employees, he will not be affected by ACA regulations and is not required to offer any health insurance coverage under this law.


Franchises and Multiple Store Locations


When calculating your FTEs for the ACA, businesses with the same or similar ownership are considered a single company. Franchises and businesses with multiple locations must factor in employees from all stores to calculate their total FTEs.

Heartland Can Help


Meeting the eligibility requirements of the ACA can be a daunting task. Heartland can help you understand the complexities, avoid noncompliance fines and reduce administrative work. With Heartland’s full support, data used to track your company’s FTEs is assessed by our dedicated payroll specialists, who can then easily calculate the correct category for your business.

Heartland is also here to offer guidance on current requirements and provide training videos, documents, updates and FAQs.

Learn more about the Affordable Care Act and how Heartland can help here