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Unlocking the Enigma: How the Affordable Care Act Counts Hours of Service for Shared Employees

Navigating the intricacies of the Affordable Care Act (ACA) can feel like deciphering a complex code. Among the provisions under section 4980H of the Internal Revenue Code, the employer shared responsibility provisions add another layer of complexity, particularly when it comes to counting hours of service for employees shared among different entities, like subsidiaries under a parent corporation.



Counting Hours of Service in a Shared Employment Scenario

The ACA employs the section 414 rules to determine if an employer qualifies as an Applicable Large Employer (ALE) with at least 50 full-time employees. When employers share common or related ownership, they form an aggregated ALE group, treated as a single entity for determining the total hours of service.

Here's the catch: If an employee works for more than one member of an aggregated ALE group during a calendar month, all hours of service for any employer in the group are combined to calculate the employee's total hours of service. It's like merging the work hours from different employers to assess the full-time status.

Choosing the Primary Employer

However, when it comes to employer shared responsibility payments and related reporting requirements, a key question arises: If an employee works for multiple members of the same ALE group, who is considered the primary employer?

During a calendar month, the employee is deemed an employee of the employer member for whom they've clocked the greatest number of hours of service. In case of an equal number of hours for two or more employers in the same group, a decision must be made to designate one as the employer for that specific month.

Understanding the Reporting Requirements

To navigate this process seamlessly, employers should refer to the Instructions for the Forms 1094-C and 1095-C, providing valuable insights into the intricacies of reporting shared employees and fulfilling employer shared responsibility obligations.

In essence, the ACA aims to streamline the determination of employer status and shared responsibility by treating aggregated ALE groups as unified entities, making it crucial for employers to keep precise records of employee hours and adhere to reporting guidelines. As the ACA continues to shape the landscape of healthcare and employment, a clear understanding of these provisions ensures employers remain compliant and avoid the pitfalls of shared employee calculations.

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