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Determining the Employer under the ACA for Multiple Owned Businesses

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.