Because an applicable large employer is defined by the regulations as one that has employed an average of at least 50 full-time employees (including both full-time and full-time equivalent employees or FTEs) during the preceding calendar year.  Thus, employers should start determining whether they will qualify for the mandate in 2014. Indeed, the look back period started on January 1, 2013. 

Leased employees, sole proprietors, partners in a partnership, members (owners) of an LLC taxed as a partnership, and 2% S-corporation shareholders are not employees. A full-time employee is an employee who was employed on average at least 30 hours of service per week. Hours of service include not only hours worked, but also all hours for which employees are paid or entitled to payment even when no work is performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. 

All employees of a controlled group or affiliated service group are taken into account in determining whether the group together constitutes an applicable large employer. If a parent owns 80% or more of the equity in a subsidiary, or if the same 5 or fewer persons own 80% or more of the equity in another company and collectively own more than 50% of both companies, the companies will be considered a controlled group, and all employees of the controlled group must be combined together for purposes of calculating the 50 full-time employee threshold.

To determine if you are an applicable large employer, calculate:

1. The number of full-time employees, including seasonal workers, working an average of 30 hours of service per week for each month.

2. The number of FTEs, which is determined by taking the total number of hours of service of other employees, including seasonal workers, and dividing it by 120 for each month.  

3. Add 1 and 2 to determine your total full-time employees (including FTEs) for each month.

4. After performing the calculation for each month, add all of the numbers determined in step 3 for the entire year and divide by 12, dropping any fraction to the lower whole number. If this number is 50 or more, you are an applicable large employer and will be responsible for complying with the employer shared responsibility mandate during 2014.

An exception exists, however.  If your workforce exceeds 50 full-time employees for 120 days or less during the preceding calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal workers, you are not an applicable large employer. The regulations state that for purposes of this particular exception, four calendar months may be treated as the equivalent of 120 days, and that the four calendar months and 120 days are not required to be consecutive.

In summary, employers who wish to avoid being subjected to the mandate in 2014 must be diligent in the hiring of full-time employees and the hours of non-full time employees.