Under the Affordable Care Act, large
employers with at least 50 full-time or full-time equivalent employees could
pay penalties if they fail to offer affordable, minimum value health coverage
to their employees. Consequently, employers must determine if they meet the
50-employee threshold. Making this determination can be complex because of the
IRS controlled and affiliated group rules, which state that employees of
entities in a controlled group are added together since controlled group
members are treated as a single employer. Thus, a company with less than 50
employees could be considered a large employer subject to the large employer
mandate. There are several types of controlled groups. A parent-subsidiary
controlled group exists when one company owns at least 80 percent of one or
more other companies. For employee plan purposes, brother-sister controlled
groups occur when the same five or fewer individuals, estates or trusts have
both a controlling interest (80 percent common ownership) and effective control
(50 percent identical ownership). Firms that provide professional services
(e.g., health care, law, engineering and accounting firms) or management
services might be in an affiliated group if they have common owners, provide
services for each other or work together to provide services to customers.
Tax-exempt organizations could be in a controlled group if at least 80 percent
of the directors or trustees of one organization are representatives of or
controlled by another organization.