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How do we calculate the average hours worked to determine the number of full-time equivalents under the Affordable Care Act?

To be subject to the Affordable Care Act (ACA) employer shared responsibility provisions for a calendar year, an employer must have employed during the previous calendar year at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50 full-time equivalents.

A full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month. Hours of service include actual hours of work as well as paid time off such as for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

According to Internal Revenue Service (IRS) guidance, an employer determines its number of full-time-equivalent employees for a month as follows:

  1. Combine the number of hours of service of all non-full-time employees for the month, but do not include more than 120 hours of service per employee.
  2. Divide the total by 120.


  • XYZ Company has 35 full-time employees for each calendar month.
  • XYZ Company also has 20 part-time employees for each calendar month.
  • Each part-time employee has 60 hours of service per month.
  • The combined hours of service for the part-time employees for a month totals 1,200 (20 x 60).
  • Dividing the hours of service of the part-time employees by 120 equals 10.
  • XYZ Company has 10 full-time equivalent employees for each month.
  • Add the number of full-time employees (35) to the number of full-time equivalent employees (10) for a total of 45 full-time employees (including full-time equivalents).
  • Because XYZ Company has less than 50 full-time employees (including full-time equivalents), it is not an applicable large employer under the ACA.



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