With Affordable Care Act (ACA) reporting due in just a few short months, we thought this might be a good time for a reminder about full-time employees or equivalents, also known as FTEs.

Question

What is an FTE, and how are FTEs calculated to be in compliance with ACA rules?

Answer

FTE can mean full-time employee or full-time equivalent employee. A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a calendar month. A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.

To determine the number of full-time equivalent employees, divide the total number of hours of service performed in a month by employees who are not full time by 120.

One reason to determine the total number of FTEs -- the combined full-time and full-time equivalent counts -- is to determine if you are an applicable large employer (ALE). Two provisions of the ACA apply only to ALEs:

  1. The employer shared responsibility provision; and
  2. The employer information reporting provisions for offers of minimum essential coverage.

If you have an average of 50 or more full-time employees, including full-time equivalent employees, then these two provisions of the ACA apply to you.