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How the ACA ALE Report calculates hours
The report calculates full-time and full-time equivalent (FTE) employee counts for the selected reporting period.
The report bases employee counts on monthly hours of service:
- Employees with 130 or more hours per month count as full-time employees.
- Employees with fewer than 130 hours per month count as part-time employees.
Quarterly and annual pay cycles
When you select Quarterly or Annually in the Pay Cycle field of Payroll Data Entry, the report distributes hours across multiple months.
Quarterly pay cycle
The report uses this formula:
Hours worked ÷ 3 months
Example:
An employee receives payment for 520 hours on August 31, 2015.
- July shows 173 hours.
- August shows 173 hours.
Annual pay cycle
The report uses this formula:
Hours worked ÷ 12 months
Example:
An employee receives payment for 1,000 hours on August 31, 2015.
- The report assigns 83 hours to each month.
- Hours appear from January through August because the check date falls in August.
Full-time equivalent (FTE) calculation
The report combines part-time employee hours to calculate the monthly FTE count.
IRS regulations limit the FTE calculation to 120 service hours (per employee) each month. If an employee works more than 120 hours but fewer than 130 hours, the report uses only 120 hours.
Monthly FTE formula
Total part-time employee service hours (capped at 120 hours per employee) ÷ 120
The report rounds the result to two decimal places.
FTE example
| Employee | Hours of service |
| John | 85 |
| Susan | 122* |
| Mike | 70 |
| Total | 275 |
Note: The report includes only 120 of Susan's hours in the total.
Calculation:
275 ÷ 120 = 2.29
The report rounds the monthly FTE count to the nearest whole number.
FTE count for March = 2
Annual ALE calculation
The report combines the monthly full-time employee count and monthly FTE count.
To calculate the annual average:
- Add the monthly totals for all 12 months.
- Divide the total by 12.
- Round the result to the nearest whole number.
Use the annual average to determine if your organization qualifies as an applicable large employer.
Pay periods that span multiple months
ACA regulations require service hours by calendar month. However, Sage 100 ERP tracks hours by pay period.
When a pay period spans two months, the report prorates the hours between those months.
Biweekly pay cycles
The report performs a proration calculation when the pay period-ending date falls between the 1st and 13th day of the month.
The calculation determines hours assigned to the previous month.
Weekly pay cycles
The report performs a proration calculation when the pay period-ending date falls between the 1st and 6th day of the month.
The calculation determines hours assigned to the previous month.
Proration formula
Day of period ending date ÷ Days in pay cycle × Hours worked = Hours counted for the current month
The report assigns the remaining hours to the previous month.
Biweekly example
John works 80 hours.
- Pay period ending date: April 4, 2015
- Calculation: 4 ÷ 14 × 80 = 23
Results:
- April = 23 hours
- March = 57 hours
Weekly example
Susan works 40 hours.
- Pay period ending date: April 3, 2015
- Calculation: 3 ÷ 7 × 40 = 17
Results:
- April = 17 hours
- March = 23 hours
Reporting recommendation
Generate the report for the full 12-month period when possible.
A shorter reporting period doesn't capture all prorated hours. This affects monthly totals and calculations.
Important information
Caution: The ACA Applicable Large Employer Report is a self-help tool. Sage doesn't guarantee report accuracy or applicability for every situation.
ACA regulations require reporting by calendar month. Because Sage 100 ERP tracks hours by pay period, the report estimates monthly totals when pay periods span multiple months.
These totals represent estimates and don't always match actual hours worked.
For tax or legal guidance, contact a qualified tax professional or attorney.
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