"I have a client with 120 employees (All Full-time) who is currently ACA-compliant with their offer of coverage. They are creating a new entity with only one employee (Full-Time), but with identical ownership to the existing business, so this new entity will be considered an ALE Member within the same controlled group. I'm trying to confirm what their ACA penalty exposure would be if they decide not to offer benefits under this
new entity.
For Penalty A, my understanding is that the new entity would be exempt due to the allocated reduction of 30 full-time employees. The allocation for the new entity's share of the 30-employee reduction would be: (1 / 121) × 30 = 0.24. Based on the guidance below, this would round up to 1, and since the new entity has only 1 employee, Penalty A wouldn't apply?
'If an applicable large
employer member's total allocation is not a whole number, the allocation is rounded to the next highest whole number. This rounding rule may result in the aggregate reduction for the entire controlled group exceeding 30.'
My next question is, Would Penalty B also not apply since no offer of coverage is made? It appears that a requirement for penalty B to apply is an offer of coverage:
an
applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and [ACA] as having enrolled for such month in a
qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,"
