Controlled and Affiliated Service Groups – ALE Determination
Controlled and Affiliated Service Groups – ALE DeterminationNovember 18, 2015
Catrina Reyes, J.D., M.P.A., Policy Analyst and Compliance Manager
The Large Employer Mandate requires Applicable Large Employers (ALEs) to offer Minimum Essential Coverage (MEC), that is Minimum Value (MV) and affordable, to substantially all of its full time (FT) employees and their dependents (does not include spouses) or otherwise be assessed a penalty. Employers must first determine if it’s an ALE. An ALE is an employer that employed an average of at least 50 FT and full-time equivalent (FTE) employees in the prior calendar year. What many employers may not know is that under the Large Employer Mandate, all employees of all businesses that are part of a controlled group and/or affiliated service group must be treated as employed by a single employer and thus must be calculated together when determining ALE status. This can result in businesses with only a few employees being an ALE if the business is part of a controlled group and/or affiliated service group and the number of FT and FTE employees combined for all businesses that are part of the controlled group and/or affiliated service group equal 50 or more.
A controlled group is a combination of two or more businesses that are under common control or ownership. There are three types of controlled groups – parent-subsidiary, brother-sister, and combined. An affiliated service group is another type of group of related employers. It is comprised of two or more organizations that have a service relationship and, in some cases, an ownership relationship. There are three types of affiliated service groups – two include a First Service Organization (FSO) and either an A-organization or B-organization, and the third is a Management Group.
More information and examples on controlled groups and affiliated service groups can be found in the following IRS publication.
There are many complex rules that go into what makes up a controlled group and affiliated service group. It’s best to seek the advice of legal and/or tax counsel to determine controlled group and/or affiliated service group status. Claremont can assist you with a referral to a legal or tax professional if needed.
To learn more about the Large Employer Mandate, download Claremont’s essential ‘Play or Pay’ guides.
Contact your Claremont team at 800.696.4543 or ACA@claremontcompanies.com.