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Affordable Care Act Guidance – Determining Full-Time Employee Status

February 24, 2014

By Scott Lyon, SBAM

Recently we had a few calls regarding the Employer Mandate, calculating penalties and counting employees.  We understand that the employer mandate and many other provisions of the Affordable Care Act are new and confusing and that many of our members are struggling with how to proceed. While we cannot tell you the best way to proceed, we can remind you of the rules so that any decision that you make will be made with good information and eyes wide open.

Remember, the Employer Mandate/Employer Shared Responsibility Requirement begins at 50 full-time equivalent employees.  For companies whose number of employees hovers at or near the magic number of 50 full-time equivalent employees (the number at which the employer mandate kicks in), now is the time to set and begin counting employees in your measurement period. Following a delay of one year, the Affordable Care Act’s Employer Mandate/Employer Shared Responsibility provisions are scheduled to begin January 1, 2015. While we are still waiting for final guidance from the DOL/IRS, etc. it is important that employers take action now to begin tracking employees’ hours.

Getting started – The Employer Mandate/Employer Shared Responsibility requires that an employer with an average of at least 50 full-time equivalent employees will face penalties if any of its full-time employees qualify for and accept a tax credit or cost-sharing reduction for the purchase health insurance through the Marketplace/Exchange.

Employees Qualifying for a Tax Credit – Employees may qualify if the employers either:

  • Does not offer minimum essential coverage to at least 95% of its full-time employees and their dependents (but not spouses) or,
  • Offers minimum essential coverage to its full-time employees that is either unaffordable or does not provide minimum value,

The penalties are:

  • For a company that does not offer coverage – $2,000 per year, assessed on a monthly basis of $167.00 per month per full-time employee minus the first 30 employees.
  • For a company offers coverage that is either unaffordable or does not meet minimum value requirements – $3,000 per each full-time employee, assessed on a monthly basis of $250.00 per month,

Calculating Full-Time Employees:

A full-time employee is any employee who is employed on average at least 30 hours per week (130 hours of service in a calendar month is treated as the monthly equivalent of 30 hours of service a week).  Hours of service includes all hours an employee is paid or entitled to be paid for actual hours worked including paid leave (vacation, holiday, illness, layoff, jury duty, military leave, etc.).  For any new employee, that at the time of hire, is expected to work at least 30 hours per week, coverage must be offered to the employee within 90 days of hire (the maximum allowed waiting period).  For current employees, coverage must begin January 1, 2015.

Measurement Period – If an employee is expected to work fewer than 30 hours per week (a variable hour employee), an employer can determine whether the employee is full-time by using a measurement period of 3 to 12 consecutive months. The measurement period looks back for current employees and looks forward for new hires. The employer must track the number of hours worked in each month during the measurement period.

Administrative Period – For current employees, an “administrative period” of up to 90 days beginning immediately after the measurement period may be used to enroll employees before the stability period begins. For new hires eligible to participate after their initial measurement period, the “administrative period” may be significantly shorter.

Stability Period – If the employee is determined to be full-time during the measurement period, coverage must be offered to the employee during a subsequent stability period which is the period immediately following the measurement period.  The stability period must be at least 6 months but cannot be shorter than the look-back period (if the look-back period is 12 months, the stability period must be 12 months).

We hope this helps, for additional information supporting SBAM members may visit www.sbam.org/decisionpoint.

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