How to accurately track your Full-Time Equivalent (FTE) employees in 2024

How to Accurately Track Your Full-Time and Full-Time Equivalent Employees to Ensure ACA Compliance.

Tracking your full-time and full-time equivalent (FTE) employees is essential for businesses to comply with the Affordable Care Act (ACA). This process might sound complicated, but with a few simple steps, you can get it right. Let's break it down in a way that's easy to understand.

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What is a Full-Time Employee?

A full-time employee is someone who works at least 30 hours per week or 130 hours per month. This is the baseline for determining full-time status according to the ACA (IRS.gov) (IRS.gov).

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What is a Full-Time Equivalent (FTE) Employee?

FTE employees are calculated by combining the hours worked by part-time employees to see how many full-time employees they would equal. For example, if two part-time employees each work 20 hours per week, together they make up one full-time equivalent (FTE) employee because their total hours add up to 40 (IRS.gov).

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Steps to Calculate FTEs:

1. List All Employees and Their Hours:
   • Keep a detailed record of all employees, both full-time and part-time, and the number of hours they work each week or month. This will help in calculating FTEs accurately (IRS.gov) (IRS.gov).
2. Calculate Monthly FTEs:
   • For part-time employees, total the number of hours they worked in a month, but don't count more than 120 hours per employee. Divide this number by 120 to get the FTE count for part-time employees for that month. For example, if part-time employees worked a combined total of 480 hours in a month, that would equal 4 FTEs (480 ÷ 120 = 4) (IRS.gov).
3. Determine Annual FTEs:
   • To find out if your business is an Applicable Large Employer (ALE) under the ACA, sum up the monthly FTEs for the entire year and divide by 12. If this number is 50 or more, you are considered an ALE and must comply with the ACA's requirements (IRS.gov) (IRS.gov).
4. Include All Hours of Service:
   • Make sure to count all the hours for which employees are paid, including time for vacations, holidays, and sick leave. However, do not include hours for seasonal employees who work 120 or fewer days during the year, nor hours over 2,080 per employee  (IRS.gov).

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Using an FTE Calculator.

To make things easier, you can use the FTE Calculator available on HealthCare.gov. This tool helps automatically calculate the number of FTEs, ensuring accuracy and saving time  (Healthcare.gov).

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Importance of Accurate Tracking.

Accurately tracking FTEs ensures that you comply with ACA regulations, avoiding penalties and ensuring that you provide the necessary health coverage to your employees. If you are classified as an ALE, you are required to offer health insurance to your full-time employees to avoid an employer shared responsibility payment (IRS.gov) (IRS.gov).

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Tracking your full-time and FTE employees accurately is essential for ACA compliance. By following these steps and using available tools, you can ensure your business meets all necessary requirements. For more detailed information, visit the IRS FAQs on Small Business Health Care Tax Credit and HealthCare.gov's FTE Employee Calculator.

Remember, keeping accurate records and understanding how to calculate FTEs will help you manage your workforce effectively and stay compliant with federal regulations.

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