Effective January 1, 2017, the New Jersey Small Employer Health Coverage Program (SEH Program) aligned its definition of a “Small Employer” for health insurance coverage purposes with the federal definition.
This means that the methodology used to determine a small employer’s group size now looks to the total number of full-time and full-time equivalent employees (FTEs) to determine if a group is ‘small’ or ‘large’:
- A Small Employer is one that employed an average of at least one but not more than 50 employees on business days during the prior calendar year and at least one employee on the first day of the Plan Year
- A Large Employer is one that employed an average of at least 51 employees on business days during the prior calendar year and at least one employee on the first day of the Plan Year.
If an employer did not exist in the prior calendar year, the determination is based on the average number of employees that is reasonably expected will be employed in the current calendar year.
When counting employees, keep in mind the following:
- Whether employees are eligible for health benefits is not considered when determining the number of employees
- Employees include union members covered under Taft-Hartley Fund benefits, regardless of whether employees have waived coverage
- A seasonal worker performs labor or services on a seasonal basis as defined by the Secretary of Labor, including retail workers employed only during the holiday season. Seasonal workers who worked 120 days or fewer during the calendar year are excluded from group size if that is the only reason the group exceeds 50 Full Time Equivalents (FTEs) as explained later in this text.
- The following are not considered employees under the SEH Program rules or for Large Employer coverage:
- An individual and his or her legal spouse when the business is owned by the individual or by the individual and his or her legal spouse
- The following individuals and immediate family members of such individuals
- Partners in a partnership
- Sole proprietors
- A 2-percent S corporation shareholders
- Independent contractors
- Leased employees
- Retired enrollees
- COBRA continuees
To calculate ‘Full Time Equivalent’ (FTE) employees, the following is used:
- Employees working 30 or more hours per week are full-time employees and each counts as one employee
- Employees working fewer than 30 hours per week are part-time and are counted as the sum of the hours each part-time employee works per week multiplied by four and the product divided by 120 and rounded down to the nearest whole number.
- Add the number of full-time employees to the number that results from the part-time employee calculation above. For example:
- Company A has 48 employees who work at least 30 hours per week and three employees who each work 20 hours per week (20 + 20 + 20) x 4 = 240; 240 ÷ 120 = 2; 48 +2 = 50 FTEs. Company A is a Small Employer
- Company B has 50 employees who work at least 30 hours per week and three employees who each work 20 hours per week” (20 + 20 + 20) x 4 = 240; 240 ÷ 120 = 2; 50 + 2 = 52 FTEs. Company B is a Large Employer
- Company C has 60 employees who work at least 30 hours per week; 40 of whom are covered under Taft-Hartley Fund benefits (and therefore have waived the coverage offered by their employer) and 20 of whom are non-union employees: 40 + 20 = 60 FTEs. Company C is a Large Employer
All NJ employers must provide a Certification when they first apply for coverage and then annually upon renewal. The Certification requires the employer to certify whether they qualify as a Small Employer or a Large Employer, based on the above.
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