ACA Employer Mandate: Who Must Offer Health Coverage

If you employ between 10-50 people on Long Island, you might wonder whether federal law requires you to offer health insurance to your employees. The Affordable Care Act (ACA) includes an "employer mandate" that applies to certain businesses, but the rules can be confusing. Let's break down exactly who must comply and what it means for your business.

What Is the ACA Employer Mandate?

The ACA employer mandate is a federal requirement that certain employers must offer health insurance coverage to their full-time employees. Think of it as a threshold – once your business crosses a specific size, you're required to provide what the law calls "minimum essential coverage" that meets affordability standards.

The key term here is "Applicable Large Employer" (ALE). If your business qualifies as an ALE, you must comply with the mandate. If not, offering health insurance remains optional (though often beneficial for recruiting and retention).

How Employee Counting Works

Determining ALE status isn't as simple as counting heads on any given day. The process involves calculating your "full-time equivalent" (FTE) employees using a specific formula.

Here's how it works: First, count all employees who work 30 or more hours per week – these are considered full-time under the ACA. Next, add up all the hours worked by part-time employees (those working less than 30 hours per week) in a month, then divide by 120. This gives you your part-time FTE count.

Add your full-time employee count to your part-time FTE count. If this total averages 50 or more employees during the previous calendar year, you're an ALE and subject to the mandate.

For example, if you have 40 full-time employees and 20 part-time employees who each work 15 hours per week, your calculation would be: 40 + (20 × 15 hours × 4.33 weeks ÷ 120) = 40 + 10.8 = 50.8 FTE employees, making you an ALE.

Coverage Requirements for ALEs

If you're an ALE, you must offer health insurance that meets two key standards to your full-time employees and their dependents.

First, the coverage must be "minimum essential coverage," meaning it includes essential health benefits like preventive care, prescription drugs, and hospitalization. Most employer-sponsored health plans automatically meet this requirement.

Second, the coverage must be "affordable." This means the employee's share of premium costs for self-only coverage cannot exceed a specific percentage of their household income. There are safe harbor methods to determine affordability based on the employee's wages from your company.

Why This Matters for Your Business

Beyond legal compliance, understanding the employer mandate helps you make strategic decisions about your workforce and benefits package. Many Long Island businesses find that offering health insurance – even when not required – gives them a significant advantage in attracting skilled employees in competitive industries like healthcare, accounting, and legal services.

Compliance requirements can seem daunting, but they also present an opportunity to structure your benefits package strategically. Some businesses discover that thoughtful workforce planning and benefits design can help them manage costs while staying competitive.

What Employees Gain

When you offer ACA-compliant coverage, your employees gain access to comprehensive health insurance that protects them from high medical costs. They can receive preventive care without copays, have coverage for major medical events, and often gain access to prescription drug benefits.

Employees also avoid the individual mandate penalties (where applicable) for being uninsured. For many of your team members, employer-sponsored coverage may be their most affordable option for quality health insurance.

Penalties for Non-Compliance

ALEs that don't offer compliant coverage face significant financial penalties. There are two types of penalties: one for not offering coverage at all to full-time employees, and another for offering coverage that doesn't meet the affordability or minimum value standards.

These penalties apply on a per-employee basis and can add up quickly for businesses with dozens of employees. The exact penalty amounts are adjusted annually, but they're substantial enough that most businesses find offering compliant coverage more cost-effective than paying penalties.

Key Planning Considerations

If you're approaching ALE status, consider your options carefully. Some businesses restructure their workforce to stay below the 50 FTE threshold, while others embrace the opportunity to offer competitive benefits. The right choice depends on your industry, growth plans, and recruitment needs.

Remember that employee counting looks at the previous year's average, so changes to your workforce won't immediately affect your ALE status. This gives you time to plan and implement compliant coverage before penalties apply.

How Benton Oakfield Simplifies ACA Compliance

Navigating ACA compliance doesn't have to overwhelm your business operations. At Benton Oakfield, we help Long Island businesses understand their obligations and design compliant benefits packages that work within their budgets.

We handle the complex calculations, monitor your ALE status as your business grows, and ensure your coverage meets all federal requirements. More importantly, we explain these benefits to your employees so they understand and appreciate what you're providing.

Ready to discuss your ACA compliance strategy? Contact our team for a consultation tailored to your business needs.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This guide is for educational purposes only. Please contact your Benton Oakfield representative to discuss how this applies to your specific situation.

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