Certified Public Accountant, New Jersey
Manny Forlenza CPA


The Affordable Care Act requires employers who have 50 or more full time equivalent employees to provide their full time employees with health insurance. Originally this requirement was slated to become effective January 1, 2014. However, in early July of 2013 this deadline was postponed until January 1, 2015. This postponement is quite beneficial for the affected employers because it gives them an additional year to digest rules that were not widely known and implement policies and procedures to comply with those rules.

Full Time Equivalent Employees
The concept of a full time equivalent employee is poorly understood and has the potential to be a dangerous minefield for employers who are unaware of how it works. The best way I know to explain it is to give you a hypothetical example.

Let’s say an employer has 45 bona fide full time employees. The owner of the business has heard that as long as he has fewer than 50 full time employees his business is not required to provide health insurance, so since he’s below the large employer threshold he thinks he’s not required to provide health insurance. But he also has 20 part time employees that average 15 hours per week. By law you add up the hours the part timers work and divide by 30 hours, the threshold number of hours worked to be considered full time under Obamacare. The result is that you get 10 full time equivalent employees, and therefore, he has 55 full time equivalent employees and is required to provide health insurance to his full time employees.

I emphasized full time, because you don’t have to provide health insurance to those workers who do not average at least 30 hours a week, but their mere presence puts you over the magic number where you will be required to provide your bona fide full time employees health insurance.

New Employee Waiting Period
The Affordable Care Act also limits the waiting period for health insurance coverage to become effective for newly hired employees to a maximum of 90 days.

Free Rider Penalty
The Free Rider Penalty applies to a large employer that do not offer affordable coverage or coverage that meets the minimum essential coverage requirement, and has one or more employee(s) who purchase insurance from the Marketplace and qualifies for a Premium Tax Credit from the Federal Government. This penalty amount is $3,000 per employee who receives subsidized coverage through the Marketplace. Thus the employer is getting a “Free Ride” from the government on the cost of providing those employees health insurance coverage and should be required to pay a “shared responsibility” penalty.

The Failure to Provide Insurance Penalty
The Failure to Provide Insurance Penalty applies to large employers that do not offer any coverage to any of its employees. This penalty amount is $2,000 per employee, less the first 30 employees. So an employer with 51 full time employees and/or full time equivalent employees would be subject to a Failure to Provide Insurance Penalty of $42,000 per year. Obviously, this penalty can get big quickly!!! Since the Federal Government pushed back the effective date by a year, employers with 50 or more full time and/or full time equivalent employees get a second chance to get this right before you run the risk of noncompliance costing you your business.