It’s snowing here in Iowa today. Sure it’s March and we’re hearty people, used to this stuff by now, but we’re anxiously awaiting the arrival of spring to snap us out of this. In the meantime, we have Health Care Reform to keep us warm. So pull up a chair, start a fire, grab yourself a cup of hot cocoa.
As your business prepares for the changes coming to health care through the Patient Protection and Affordable Care Act (PPACA), we thought we’d revisit some questions that some of our clients have asked us about regarding the act. This week, we’ve been answering questions from our clients about how they need to determine full-time status. Merit Resources helps our clients figure this stuff out, of course, but for those of you who aren’t Merit clients, we thought we’d help explain it a bit more.
Determination of Obamacare Full-Time Employee Status
An employer subject to the Obamacare Employer Mandate, even if they offer health insurance coverage to employees, may still be exposed to a penalty if any full-time employee receives a premium tax credit as a result of either the employer’s health care plan be deemed to be unaffordable or if it doesn’t meet the required Minimum Value (MV) standards. Understanding which employees will be considered full time under the Act will be critical to understanding the total potential financial penalties of failing either of these requirements. If either the plan fails to meet the MV requirements or if the premium charged to the employee is unaffordable, (greater than 9.5% of the employee’s household income) the employer will be assessed $3,000 per year ($250 per month) for each employee who subsequently obtains a premium tax credit in a public marketplace.
The ACA defines a full-time employee as one who provides an average of 30 hours of service per week in any month, which includes paid leaves (i.e., vacation, sick days, PTO, jury leave, etc.). This definition runs contrary to many employers current practices, which have had no such limitations. Traditionally, full-time employment is most often defined as working an average of 32 hours a week and it is not uncommon for some employers to have the weekly average be as high as 38 hours or even 40 hours. The result of this change is causing some consternation as most employers use “benefit eligibility” for all of their health and welfare plans, such as dental insurance, life insurance, Flexible Spending Accounts (FSAs), vacation/PTO etc.
Additionally, many insurance contracts stipulate who is considered eligible to participate based upon their full time status, which is typically defined in weekly hours of service. Assuming an employer does not want to administer various plans with inconsistent eligibility requirements, employers and their insurance brokers will need to review and request contract changes from carriers offering other ancillary insurance products to the employer’s workforce where these terms are not aligned.
Not every employer of every industry has a strict 9:00 AM – 5:00 PM workweek for every employee. Inasmuch as full-time status is determined on a monthly calculation under the Act, there is a great deal of anxiety among employers as to those administrative issues associated with tracking employees hours, specifically those whose work hours fluctuate due to a wide variety of and often unforeseeable circumstances. In situations in which an employee is hired for or promoted to a position the employer classifies as or reasonably expects to be full time, the employee must be eligible for the employer’s health plan after the employer’s applicable waiting period. The administration has released proposed safe harbor guidance for measuring full-time employee status for variable-hour employees whose status is not known due to fluctuating hours or uncertain duration of employment. We’ll dive into the measurement period and safe harbor periods in future posts.
Employers can use an initial measurement period to determine the status of newly hired variable hour or seasonal employees. The associated stability period for newly hired variable hour or seasonal employees must be the same length as the stability period for ongoing employees. Check out the handy flowchart we've created on this subject:
As we move along in our conversation about the Affordable Care Act, we hope that Merit Resources can be a resource to you and your business. Please don’t hesitate to contact us using the link below and we’ll be happy to help you out.
In the meantime, if you’d like to check up on the things that your business needs to take care of under the Act, just download our free checklist and timeline, plus some bonus infographics and flow charts which illustrate a few key areas of the Act. Click the link below:
Hope you enjoyed the cocoa.