IRS Defines “Full-Time” Employees for Health Care Benefits

Earlier this month, the Internal Revenue Service issued important guidance for employers on the rules for identifying “full-time” employees for the purposes of the Affordable Care Act.

It’s an important clarification, write employment attorneys Josh Bobrin and Edward Leeds (Ballard Spahr), because:

“Effective January 1, 2014, employers with 50 or more full-time equivalent employees are subject to the ACA’s pay or play provisions. These provisions may impose a monthly penalty on an employer when certain of its full-time employees receive subsidized coverage through a state insurance exchange if the employer fails to offer them (and their dependents) the opportunity to enroll in appropriate health coverage or if that coverage fails to meet minimum value or affordability requirements.”

Three key considerations:

1. ‘”Full time”= 30 hours or more per week:

“… an employer would determine each employee’s full-time status by looking back at a defined period of three to 12 consecutive months, to determine whether the employee averaged at least 30 hours of service per week or at least 130 hours of service per calendar month. If so, the employee would be treated as a FT employee during a subsequent ‘stability period’ of up to 12 months (regardless of his or her actual hours worked during that period), with the length of the stability period based on the length of the initial measurement period.” (Sutherland Asbill & Brennan)

2. New hires are treated differently:

“A modified safe harbor rule applies to newly hired employees, along with safe harbor rules that facilitate the transition of a new hire to the standards that apply to ongoing employees. The safe harbor methods set forth in the notice are particularly applicable to seasonal employees and employees who work variable hours that may or may not average at least 30 hours.” (Ballard Spahr)

3. This isn’t the last word:

“There are other aspects of the employer shared responsibility rules for which guidance has either not been issued (e.g., how the rules apply to multiemployer plans), or, if issued, is either incomplete (e.g., what constitutes essential health benefits) or the subject of contention (e.g., whether affordability is based on self-only coverage or, in appropriate instances, family coverage).” (Mintz Levin)

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