Applicable large employers (ALEs)—generally those with at least 50 full-time employees, including full-time equivalent (FTE) employees—are subject to the “pay or play” provisions of the Affordable Care Act. If these employers do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees, they may be subject to a penalty if at least one full-time employee receives a premium tax credit or cost-sharing reduction for purchasing coverage on an Exchange.

According to the IRS, companies that have a common owner or are otherwise related generally are combined and treated as a single employer for purposes of determining ALE status. If the combined group meets the 50 full-time employee threshold, then each separate company in the group is subject to the “pay or play” provisions—even those companies that individually do not employ enough employees to meet the threshold.

Note: There is an important distinction for employers to keep in mind regarding the aggregation rules described above. Although related employers generally are combined and treated as a single employer for purposes of determining ALE status, potential liability under the “pay or play” provisions is determined separately for each member of the ALE group.

Our Pay or Play section provides step-by-step guidance, worksheets, and calculators that can help employers determine whether they will be subject to a penalty and how to calculate it.