Reporting for Aggregated ALE Groups

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Entities that are part of the same controlled group or affiliated service group under IRC §414 rules due to common ownership or shared management or services are generally viewed as a single employer for various benefit compliance purposes, even though they have separate EINs. Whether entities are part of the same controlled group or affiliated service group matters for purposes of §4980H offer of coverage requirements and §6056 reporting requirements as well.

To start with, full-time equivalents (FTEs) of all entities within the controlled group or affiliated service group are aggregated for purposes of determining whether the entities averaged 50 or more FTES. If together the entities averaged 50 or more FTEs in the previous calendar year, then each entity in the controlled group or affiliated service group is an applicable large employer (ALE), even if individually an entity averaged less than 50 FTEs. Together they form an “Aggregated ALE Group,” and each entity is considered an “ALE Member.”

For an Aggregated ALE Group that may share employees between entities, the hours of service must be aggregated across the ALE Members to prevent an employee who would otherwise be considered full-time from being reported as part-time.  For employees who are full-time based on aggregated hours, and therefore required a Form 1095-C, only one entity should report for the employee each month. The entity the employs the employee for the most hours for the month should report for the employee for that month. See the example below:

Example: Companies A, B and C are part of an Aggregated ALE Group and all employ Joe in January (Company A – 25 hours per week, Company B – 5 hours per week, Company C – 5 hours per week).  Joe is full-time because he has 30 or more hours per week of service when aggregated between the entities. Company A should technically claim Joe as a full-time employee, offer coverage and report on Joe for the month of January.  NOTE – So long as an offer of coverage is made by one of the entities, it will be considered an offer of coverage on behalf of whichever entity is responsible (Company A in this example); but if an offer is not made, Company A would be liable for the potential penalty for January.

Although the entities of a controlled group or affiliated service group are combined for purposes of determining ALE status and the full-time employee status of shared employees, each ALE Member is separately responsible for offering coverage in accordance with §4980H or facing potential penalties. The penalty is applied on an individual basis to each entity rather than applying across the whole Aggregated ALE Group, except that the waiver of 30 (for purposes of calculating penalty §4980H(a)) is applied on a pro rata basis.  See the example below:

Example: Aggregated ALE Group with 100 full-time employees in total (Company A – 50 full-time employees, Company B – 30 full-time employees, Company C – 20 full-time employees). Company A and B offer coverage to all full-time employees, but Company C chooses not to offer any coverage. The penalty under §4980H(a) would be calculated as follows:

Company A – No penalty

Company B – No penalty

Company C – .20*30 = 6 waived —> (20-6) x §4980H(a) penalty

Similarly, because each ALE Member is separately responsible for compliance with §4980H offer of coverage requirements, each ALE Member is required to file Form 1094-C and Form 1095-Cs reporting offers of coverage information for its own full-time employees. Employer reporting is always required to be handled on a per EIN basis, even for an Aggregated ALE Group. Each ALE Member (or separate EIN) will submit its own Form 1094-C marked as the authoritative transmittal along with Form 1095-Cs for its own full-time employees and covered individuals. The only difference in reporting for entities that are part of an Aggregated ALE Group (i.e., a controlled group or affiliated service group) is that on the Form 1094-C, each ALE Member will mark the “yes” box on Line 21 of the Form 1094-C indicating they are part of an Aggregated ALE Group, and then also complete Part III, column (d) and Part IV listing the other members and their tax IDs; otherwise each ALE Member reports separately.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.