Large employers should be aware of changes regarding employee healthcare coverage under the Patient Protection and Affordable Care Act.

Effective January 1, 2014, a large employer (including non-profits and governmental entities) is subject to penalties if it fails to offer health coverage to full-time employees or if the coverage that it offers is not affordable or does not provide minimum value.

What is a large employer?

An employer that employs an average of at least 50 full-time (30 hours of service per week or 130 hours of service per calendar month) and full-time equivalent employees (with an exception for seasonal employees employed for 120 days or less) during the calendar year is considered a large employer. All employees that are under common control under Code Section 414(b) or (c), or that are members of an affiliated service group under Code Section 414(m) or (o), are also taken into account.

Who is an employee?

For purposes of these rules, only common-law employees are counted. A sole proprietor, a partner in a partnership, a member of a limited liability company taxed as a partnership, and a 2-percent or more S corporation shareholder is not counted as an employee. Also excluded from this test’s definition of “employee” is any individual who is paid by a staffing agency but provides services to an employer on a substantially full-time basis, including an individual whose services would meet the “leased employee” definition of Code Section 414(n).

Determine if your business will be a large employer for 2014, based on the company’s anticipated full-time employee count for 2013. If the company and other members of its controlled group regularly employ between 40 and 60 full-time employees and FTEs, establish a 6 month or longer transition period in 2013 to determine large employer status for 2014.