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What does full-time and full-time equivalent mean?

For the purposes of the Affordable Care Act, employers need to average their number of employees across the months in the year to see whether they are considered an applicable large employer (ALE). An employer needs to have at least 50 full-time or full-time equivalent employees, on average during the prior year, to be considered an ALE for the current calendar year.

Full-time employee. A full-time employee is any employee that averages 30 hours of service per week during a calendar month, or at least 130 hours of service during the calendar month.

Full-time equivalent employees (FTE). In general, all employees of an employer are taken into account when determining FTEs, including employees who are terminated. FTEs are determined by combining the hours of service of all non-full-time employees for the month—but do not include more than 120 hours of service per employee—and divide by 120.

Example: Ministry X has 40 full-time employees and 20 part-time employees that each work 60 hours per month.

Calculate total of FTE employees for each month.

20 part-time employees x 60 hrs/month = 1,200 hrs/month
1,200 hrs/month ÷ 120 (max. allowed service hours) = 10 FTEs each month
Ministry X has 10 FTE employees each month.

Calculate total combined full-time and FTE employees for a year.

40 full-time employees x 12 months = 480/year
10 FTEs each month x 12 months = 120/year
480 full-time + 120 FTEs = 600 employees per month, per year
600 employees per month, per year ÷ 12 months = 50 combined full-time and FTEs
Ministry X has 50 combined full-time and FTE employees.

Although Ministry X only has 40 full-time employees, it is considered an ALE for 2016 when the hours of its full-time employees are combined with its part-time employees.

The IRS offers additional clarification to help determine who is a full-time employee, including what counts as hours of service.

Contact your ministry’s legal or tax advisors and medical insurance provider for additional guidance.

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Our church received a notice from the IRS. I’m a CPA, but payroll taxes aren’t my specialty. I forwarded the notice to MinistryWorks to see if they could help. Within a couple of hours, I received a reply that said, ‘We’ll take care of it!’ That kind of service is normal with MinistryWorks, and we’re paying less than we had been paying our previous payroll provider. I can’t recommend MinistryWorks enough!
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Mosaic Church, Indianapolis, IN