How to Determine if You are an Applicable Large Employer (ALE)
In this article, we will break down the complex world of Applicable Large Employers (ALEs) and their responsibilities as employers providing an Individual Coverage Health Reimbursement Arrangement (ICHRA) to their employees.
Defining Applicable Large Employers (ALEs)
Applicable Large Employers (ALEs) are businesses with 50 or more full-time employees, including full-time equivalent employees or "FTEs."
FTEs are calculated by adding up the total hours worked by part-time employees and dividing that number by the standard hours worked by a full-time employee. This calculation helps determine if your business meets the threshold of 50 or more full-time employees.
ALEs face legal obligations under the Affordable Care Act (ACA). They are required to offer affordable healthcare coverage to their full-time employees, or face potential penalties. This means that as an ALE, you need to carefully consider your health benefit options and ensure that they meet the ACA's affordability standards.
Accurately Calculating ALE for Your Business: A Step-by-Step Guide
Determining your ALE status involves intricate calculations. Here's a comprehensive step-by-step guide to help you navigate through the process:
- Count all full-time employees: Begin by counting all your full-time employees, defined as those working an average of 30 or more hours per week, for each calendar month. This includes both salaried and hourly employees. It's important to keep accurate records of their hours to ensure precise calculations.
- Count the hours worked by part-time employees: Next, you need to determine the number of hours worked by your part-time employees, those working fewer than 30 hours per week. Add up the total number of hours worked by all part-time employees during a specific calendar month.
- Divide the total part-time hours by 120: Once you have the total number of hours worked by part-time employees, divide that number by 120. This calculation is necessary to convert part-time hours into full-time equivalent (FTE) employees. For example, if your part-time employees worked a total of 480 hours in a month, you would divide 480 by 120, resulting in 4 FTE employees.
- Add the full-time employee count to the FTE count: Now, add the full-time employee count from step 1 to the FTE count from step 3. This will give you the combined total of full-time and FTE employees for a specific calendar month.
- Divide the combined total by 12: To determine your average monthly count, divide the combined total of full-time and FTE employees by 12. This calculation provides an accurate representation of your ALE status throughout the year.
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ICHRA stands for Individual Coverage Health Reimbursement Arrangement (ICHRA). This health arrangement allows you to pick your own health insurance plan using your employer’s monthly tax-free allowance. These funds can be used to cover insurance premiums, including dental and vision, as well as qualified medical expenses.
What are the benefits of an ICHRA?
- Your health plan belongs to you, and you can keep your health insurance if you leave your company.
- You get to choose from any qualified health plan on the market. Venteur can help you select a plan where your preferred doctors, providers, and prescriptions are covered.
- If you choose a health plan that costs less than your employer contribution, the extra funds are added to Venteur’s Health Wallet, an account used to pay for qualified medical expenses.
Group health insurance plans are purchased by companies and offered to their employees. Traditional group plans take a one-size-fits-all approach to healthcare, giving employees limited choice when it comes to their coverage options. Employer-sponsored ICHRAs give employees a tax-free allowance to pick any plan on the public exchange that meets their unique needs.
1. What Your Health Wallet Balance Represents:
Your Health Wallet balance could be thought of as a measure of the medical expense reimbursements you're entitled to under your health insurance plan. It's essential to note that it isn't quite like a bank account with a set amount of accessible cash. Rather, consider it as a marker of what you're eligible to get reimbursed for as part of your ICHRA plan.
When you shop for insurance through the app, you will see a dollar amount that is available for out-of-pocket expenses. This amount is what gets contributed to your Health Wallet account for your use in reimbursements. However, depending on how your employer has setup the account, it may be available immediately or it may be available after every monthly invoice.
2. Your Health Wallet Account:
When your account is setup, there is a predetermined way on how your Health Wallet functions for your reimbursement funds. The first scenario is that there is money that has been set aside at the start of the period which can be used for your reimbursements. You may see the entire amount entitled to you is immediately available for medical expense reimbursements. It's like having a store of health benefits ready to be used when you need them.
3. Simplifying the Health Wallet Experience:
We're always striving to enhance your experience and are currently working on making the Health Wallet balance operate more like a pre-paid debit card. This shift aims to streamline the funding process further and allow you quicker and more direct access to your health reimbursements, leading to an even smoother journey for you.
Remember, whether your account shows the funds immediately or after every invoice, it doesn't affect the overall sum you're entitled to under your ICHRA plan; it merely affects the timing of when you will receive the reimbursements.
Your trust is important to us, and we're continually striving to make our services better for you. If you ever have questions about your Health Wallet or anything that would help make for a more understandable benefits experience with us, don't hesitate to reach out to our customer service team.
The Affordable Care Act (ACA) requires that employers with more than 50 full-time equivalent employees provide health insurance to their employees. This is known as the 'employer mandate'.
ICHRAs can meet the mandate as long as they are considered 'affordable.' According to IRS, 'an ICHRA is affordable if the remaining amount an employee has to pay for a self-only silver plan on the exchange is less than 8.39% of the employee’s household income.'
To simplify, this means that the ICHRA contribution an employee receives cannot be less than the lowest-cost silver plan available to the employee - (9.02% of the employee's household income).
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