Under the ACA rules, it states that an employee is considered full-time if he or she is expected to work at least 30 hours per week, or 130 hours per month. With the employer mandate in effect, there are a few ways to assess whether or not your employees are considered full-time and eligible for employer-provided insurance.
First, review to see if an employee is expected to work 30 or more hours per week. Any employee who meets that requirement should immediately be seen as a full-time employee.
Now for the much more complicated process of determining seasonal and part-time employment. An employee is a variable-hour employee if their weekly schedule fluctuates above and below the 30 hour mark. Since there is fluctuation, it is not immediately apparent if this employee will meet the 30 hours per week or 130 hours a month necessary to be classified as a full-time employee.
The IRS has created safe harbor methods for these determinations. An employer can “look back” at a defined period to determine whether or not an employee should be included as a full-time employee. This “measurement period” can be between three and twelve consecutive months. Following the “measurement period”, there is a “stability period” where said employees are considered full-time and it is locked in for at least 6 months or the same duration as the “measurement period”. There are continual stipulations regarding the periods to follow that deal with how new “measurement” and “stability” periods are calculated and put into place.
Sound complicated? Very much so. This is a great time to meet with us and discuss strategy to comply with the provisions to save yourself future headaches.
What am I considered? A large employer or a small employer?
Employers with a combination of full-time and part-time employees equaling a total of 50 full-time equivalent employees, will need to offer health coverage that provides a minimum level of coverage to full-time employees (and their dependents) or be subject to an Employer Shared Responsibility payment if any employees receive a premium tax credit for using the Health Insurance Marketplace.
Small businesses of less than 50 employees are not subject to the Employer Shared Responsibility provisions. The vast majority of businesses will fall into this category.
The Employer Shared Provisions are complicated. Many federal agencies (think IRS, Department of Labor, and Department of Health and Human Services) come together to determine whether or not you are in compliance. It is recommended that you not only work with your Accountant but also a Health Insurance professional to determine what your company’s needs are and how to best fulfill the rules and your employees. We recommend that you also seek advice from a lawyer specializing in PPACA compliance.
Penalties for Non-Compliance
The IRS has shown the penalty structure for non-compliance in the following manner:
If you are a large employer and you offer coverage to fewer than 95% of your full-time employees, the Employer Shared Responsibility payment is equal to the number of full-time employees who are employed for that year (minus up to 80 in 2015 and then 30 in 2016), multiplied by $2000, as long as at least one full-time employee receives a premium tax credit.
The calculations for a situation where insurance was offered in some months but not all months is even more complicated. The amount is computed separately for each month for months where coverage is not offered. The amount of the payment is equal to the number of employees that were employed for that month, multiplied by 1/12 of $2000.
These are complicated provisions where the assistance of your accounting, legal, and insurance professionals will go a long way to making sure you are staying compliant with the federal mandates on insurance.
If you'd like a review of your situation, please contact Great Lakes Insurance & Financial Services Agency at 888-883-5290 or email Kinzie@GLIBrokers.com