The ACA’s employer mandate: Who gets covered?
Once you’ve determined that you are a large employer that is subject to the Affordable Care Act’s (ACA) employer shared responsibility mandate, do you know who you must offer coverage to in order to avoid incurring penalties?
Once you’ve determined that you are a large employer that is subject to the Affordable Care Act’s (ACA) employer shared responsibility mandate, do you know who you must offer coverage to in order to avoid incurring penalties? This is the third installment in our series updating members on IRS guidance published early this year on the Affordable Care Act’s (ACA) employer shared responsibility mandate.
The ACA requires that, in order to avoid being subjected to IRS penalties, you must offer affordable, minimum essential coverage that offers minimum value (more on those terms in our next installment) to all “full-time employees and their dependents”. Under the ACA, a “full time” employee means any employee who works 30 or more hours per week, or 130 hours per month. All hours actually worked must be counted, plus all hours not actually worked, but for which the employee is entitled to payment, such as vacation, sick pay, paid time off, etc. For employees who don’t track their hours, you may use either a “days worked” equivalency, in which you credit the employee for eight hours in a day in which he or she works any time; or a “weeks worked” equivalency, in which you credit the employee for 40 hours in a week during which the employee works any time. For employees, including seasonal employees, whose hours fluctuate such that, based on the facts and circumstances, you cannot reasonably know if the employee will work 30 or more hours per week, you have the option of using a safe harbor in which you monitor the employee’s hours over a “standard measurement period” of between three and 12 months. If the employee works 30 or more hours per week (or 130 hours per month) over the standard measurement period, then you must treat them as full-time during a “stability period” of between 6 and 12 months, which follows the standard measurement period, regardless of how many hours they actually work during that stability period.
These safe harbor rules for variable hour employees are complicated, so you’ll want to work with your benefits advisor to develop a corporate compliance plan and strategy for handling variable hour employees. The ACA also requires that you offer coverage to the “dependents” of full-time employees; however, the IRS has clarified that “dependents” does not include spouses, only children of the employee, up to age 26. Questions regarding health care reform compliance? Contact Kristine Bingman at Vigilant for legal consulting and advice.