First add up the low-hanging fruit.
If an employee is expected to work 30 or more hours per week, he/she is classified as a full-time employee. You can immediately put all of these people in one category.
Decide how you’ll track hours for variable-hour or seasonal employees
An employee is a variable-hour employee if his/her weekly schedule fluctuates above and below 30 hours.
The IRS has proposed a safe harbor method for employers to determine each employee’s full-time status by counting employee hours using a look-back/stability period. There are two types of measurement periods:
- The initial measurement period for new employees and;
- The standard measurement period for ongoing employees. The measurement must be between 3 and 12 consecutive calendar months.
If the variable-hour employee averages at least 30 hours per week during the measurement period, then the employee will be considered full-time during the following stability period (which needs to stay consistent with the measurement period). The employee’s status is “locked in,” regardless of the average hours worked during the stability period.
The stability period always begins immediately after the end of the measurement period and must be at least six consecutive months or the duration of the measurement period, whichever is greater. For example, if the employer used a 12-month look-back period, the duration of the subsequent stability period must be 12 months.
Review your company’s eligibility definition
The ACA full-time employee definition differs from the 40-hour per week full-time eligibility requirement that many companies currently use. Adjust accordingly to make things less confusing for you.
Don’t forget about ERISA while trying to become ACA compliant.
In a class action suit filed by Dave & Buster’s employee, Maria De Lourdes Parra Marin, claims her employer announced that compliance with the ACA would require a cut in hours to reduce the number of full-time employees from 100 to 40 for the purpose of avoiding $2 million in additional health insurance costs. After the employer mandate took effect, she alleges her hours were in fact cut, she lost full-time status, and her insurance was cancelled.
While an employer who reduces employee hours would not violate any specific provision of the ACA, Dave & Buster’s employees are pursuing their claim under ERISA.
“Under Section 510 of ERISA, an employer cannot intentionally interfere with an employee’s right to benefits,” says Lorie Maring an attorney with the Atlanta office of Fisher & Phillips LLP. “What plantiffs are claiming is that by reducing their hours, the company was intentionally interfering with their right to receive health insurance.
How can your clients stay out of trouble and protect themselves? Self-funding health care benefits with FreedomCare can give them peace of mind and control over their health benefits. We have guaranteed ACA compliant solutions available at different rates to meet the needs of most employers. Reach out today.
This article is not to be offered as legal or tax advice. Neither Freedomcare nor the publisher are engaged in legal or tax advisory services. For advice on specific tax or legal questions, contact an attorney, CPA or other professional advisor. IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.