If your business is not a large employer, federal law does not require you to offer health insurance, and you will not face a penalty for not offering it. Some owners choose to offer it anyway, to help with hiring.
Who counts as a large employer
The IRS calls it an applicable large employer. You are one if you had at least 50 full-time employees, including full-time equivalent employees, on average during the prior year.
- Full-time means at least 30 hours of service a week on average, or 130 hours a month.
- Full-time equivalents come from everyone else. Each month, add up the hours of all employees who are not full-time, counting no more than 120 hours per person. Divide the total by 120.
A quick example
Say you have 40 full-time employees and 20 part-time employees who each work 60 hours a month. The part-time hours add up to 1,200. Divided by 120, that makes 10 full-time equivalents, for a total of 50. If that holds on average across the year, you are a large employer the following year.
If you are under 50
You can still offer coverage. A small group plan, an HRA built for small employers, or a set monthly amount toward coverage your staff choose are all on the table. See what a small business can offer.
State and city rules can add requirements on leave and retirement savings even when health coverage is optional. Check your state.
If you are 50 or more
The federal employer rules apply, and so does a yearly report to the IRS. See what changes at 50 employees.
Questions to bring to your advisor
- Are we near 50 full-time employees once part-time hours are counted?
- If we keep growing, which year would the federal rules start for us?
- What could we offer before we have to?
