ACA: Full-Time Equivalents

January 31, 2013 | , Benefit Consultant

A key definition for the Affordable Care Act’s (ACA) employer mandate that becomes effective in 2014 is the definition of full-time employees. The number of full-time employees will determine application and cost of the employer mandate, as well as the automatic enrollment provision.

Previous blog pieces have covered defining full-time versus part-time employees thus we won’t expand upon that here. What we wish to cover instead is the oft-overlooked application of “full-time equivalent” employees.

Full-time equivalence comes into play for employers determining if they must provide health coverage to their staff (the so-called “Pay or Play”rule, which is triggered at 50 full-time equivalent employees). This means employers must include part-time staff in this calculation. For example, two employees that both work 15 hours per week would equate to one full-time employee. Thus, an employer with 30 full-time employees and 40 half-time employees is subject to the mandate to provide health insurance. Of course, counting part-time employees is solely for the purpose of determining application of the employer mandate – health insurance would only be provided to full-time staff (30 in this example) and not extended to those whose status is part-time. 

To break down the calculation, an employer would tally the total hours worked by their part-time staff in a given month and divide that total by 120 (30 hours x 4 weeks). The result would be the number of full-time equivalent employees. Add this number to the total number of bona fide full-time staff (at 30 hours/week or more) and you have your end result.

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