Gain command over the matter concerning the regulated group 

An employer will be considered as an applicable large employer in a given year if they had an average of at least 50 full-time employees, including those that are considered as full-time equivalent employees (FTEs). In this context, the employer encompasses not only the main business entity, but also all entities in the client’s group controlled by the employer and any service groups associated with them, as defined by ERISA. Therefore, when determining if the controlled group or affiliated service group as a whole is an applicable large employer, all full-time employees (including FTEs) within these groups are taken into consideration.

Would you like to see an example of the math before we break down what qualifies as a controlled group? Let’s say the client has 30 full-time employees, and they are part of a controlled group of businesses. This controlled group includes the following entities: (1) Company A, a barber shop with seven full-time employees; (2) Company B, an Italian restaurant with 15 full-time employees; and Company C, a diving school with three full-time employees. In total, the group under control has a workforce of 55 full-time employees (30+7+15+3), which qualifies them as a significant employer group.  It is important to note that each member of this group is considered an applicable large employer and is responsible for the employer shared responsibility payment regarding their own employees. For instance, this implies that Company A is obligated to offer ACA-compliant coverage to all of its seven full-time employees in order to avoid facing a penalty under ACA regulations. Conversely, if Company B fails to provide ACA-compliant coverage to its 15 full-time employees, Company A will not be penalized for Company B’s negligence. Company B will inevitably incur penalties due to its own lapse in providing ACA-compliant insurance to its workforce. It can be as perplexing and interconnected as a tangled bowl of spaghetti, don’t you agree?

When someone assumes the role of the regulators, these rules begin to have some logic. The main objective is to categorize as many employers as possible under the ACA’s employer mandate. That’s why there is a gathering of employees from controlled group members and affiliated service group members in order to determine if an employer falls under the category of a large applicable employer. Once a controlled group or affiliated service group is considered an applicable large employer, the members of the group are then analyzed separately for the purpose of applying the mandate (in other words, each employer is assessed individually).

What does the term “controlled group” or “affiliated service group” mean?  The response to that inquiry can be discovered in the extensive and intricate regulations that establish rules regarding attribution, disqualification, and exclusions, all of which are aimed at determining the existence of a controlled group. However, in a broad sense, there are two main categories of controlled groups, and we will not discuss affiliated service groups in this article.

A parent-subsidiary controlled group exists when:

• One or more chains of corporations are connected through stock ownership with a common parent corporation;
• 80% of the stock of each corporation, (except the common parent) is owned by one or more corporations in the group; and
• The parent corporation owns 80% of at least one other corporation.

A sibling-run group is established when a maximum of five owners collectively or separately possess 80% or more with substantial control of 50% or more of two or more companies. In order to assess the 50% control criterion, the lowest ownership percentage in any of the suspicious companies is taken into consideration.