The Affordable Care Act requires that all businesses with 50 or more full-time equivalent employees (FTEs) offer health coverage to full-timers or face the Employer Shared Responsibility payment. The revised employer mandate states that those businesses with 50–99 FTEs must begin insuring 95 percent of full-time employees by 2016.

It’s possible, however, that as your business needs change, so might your number of FTEs. If you drop below 50 FTEs or increase your workforce to over 100 FTEs, the ACA has different mandates in effect.

Under 50 Full-Time Employees

According to the ACA, only an applicable large employer (ALE) is subject to penalties regarding employer-sponsored health insurance. If you are an employer with fewer than 50 FTEs, you are exempt from the employer mandate and will face no penalty for declining to offer health coverage to your employees.

If your business shrinks and you are no longer considered an ALE, you may be able to discontinue coverage without facing a penalty. However, the size of your business is determined by the previous calendar year. If your FTE number falls below 50 during 2016, you can still be penalized for dropping coverage if your numbers were 50 or above in 2015. If you then keep your FTE number below 50 for 2017, you would not face a penalty because your numbers were not at ALE levels in 2016.

Over 50 FTEs

There is a one-time transitional rule offered to employers to determine coverage for 2015. In 2015, an ALE will have 100 or more FTEs. In 2016, an ALE will have 50 or more employees. The ALE has the ability to determine whether the employer mandate applies to the business by using any six consecutive calendar months in 2014 for determining FTE headcounts, instead of the entire 2014 calendar year.

Beyond 2014, though, employers will have to follow a grace-period rule that will be based on the prior calendar year headcount, according to the Department of the Treasury. Essentially, you will be protected from penalties in your first year of being designated an ALE as long as you offer affordable coverage to your full-timers by April 1 of the year in which ALE designation takes effect. If coverage is not offered by April 1, penalties would be incurred and retroactive to January 1 of that year. For example, if you become an applicable large employer in August of 2015, you will be considered an ALE in 2016. If you provide coverage by April 1, 2016, then you will not receive a penalty. This grace period is available the first year that an employer becomes an ALE. If the employer falls under the ALE threshold for a year or more and then becomes an ALE again, the grace period will not apply.

The U.S. Small Business Administration offers a helpful summary of the key provisions of the Affordable Care Act that you should understand. Whether you are experiencing an increase or decrease of FTEs, it is important to be aware of how the requirements of the Affordable Care Act will impact your business.

Allison Hutton is an experienced writer, editor, communications professional, researcher and social media consultant. During her more than 15 years of communications and writing experience, Allison has worked with a variety of clients, from small business owners to Fortune 500 companies. She has an M.S. in entertainment business, a B.A. in communication and lives in Pittsburgh, Pennsylvania, with her husband and four children.