Do we have to offer health insurance to our part-time employees?
No. – Part-time employees do not have to be offered insurance. In fact, the Affordable Care Act doesn’t explicitly mandate any employer offer their employees acceptable health insurance, however, starting January 1, 2015, certain large employers may face penalties if one or more of their full-time employees obtains insurance through an exchange and obtains premium tax credit.
If part-time employee works more than 30 hours during measurement period, you must offer correct?
Yes, if the part-time employee averages at least 30 hours per week during the measurement period they will be considered full-time under the ACA and thus eligible for health insurance benefits during the entire following stability period. That is where an employer really has to be careful and look at hours to make sure that what they believe to be a part-time employee is not in fact a full-time employee under the ACA.
What is required for 1/1/14?
Beginning 1/1/2014 - Individual Mandate - Individuals not carrying health insurance face a penalty. Nonexempt U.S. citizens and legal residents must pay a penalty if they do not maintain minimum essential coverage, which includes government sponsored programs (e.g., Medicare, Medicaid, Children's Health Insurance Program), eligible employer-sponsored plans, plans in the individual market, certain grandfathered group health plans and other coverage as recognized by the Department of Health and Human Services (HHS) in coordination with the IRS. There are a number of exceptions, such as the one for certain lower-income individuals. Refundable tax credits for low-moderate income families buying certain health insurance. For tax years beginning after 12/31/2013, a new refundable tax credit ("the premium assistance credit") under Code §36B applies to qualifying tax payers who get health insurance coverage by enrolling in a qualified health plan through an exchange.
Large employers need to determine if their employer sponsored plan is affordable and offers minimum value. In 2014 a plan is affordable if the portion of the annual premium the employee must pay for self-only coverage doesn’t exceed 9.5% of the taxpayer's household income (Reg §1.36B-2(c)(3)(v)(A)(2)). An employer sponsored plan provides minimum value if the plan covers at least 60% of the expected total allowed costs for covered services Beginning in 2014, employers will provide employees with a summary of benefits and coverage indicating whether the plan provides minimum value (Code §36B(c)(2)(C)(ii)). "Qualified Health plans" may be offered through a cafeteria plan, but only for "qualified employers".
Smaller businesses - For tax years beginning after December 31, 2013, a reimbursement (or direct payment) for the premiums for coverage under any "qualified health plan" purchased in a group market through a health insurance Exchange is a qualified benefit under a cafeteria plan, but only if the employer is a qualified employer.
Excise tax on health insurance providers - For calendar year beginning after 12/31/2013, an annual fee applies to health insurance providers based on a health provider's market share of net premiums written for a U.S. health risk for the preceding calendar year (starting with the calendar year ended 12/31/2013). The fee will not apply to companies whose net premiums written are $25 million or less. For purposes of the fee, health insurance does not include: coverage only for specified disease or illness; hospital indemnity or other fixed indemnity insurance; insurance for long-term care; or any Medicare supplemental health insurance. (PPACA Sec. 9010, as amended by HCERA Sec. 10905, as further amended by HCERA Sec. 1406)
What is required for 1/1/15?
Beginning 1/1/2015 - New Information reporting and related statement obligations apply under Code §6056 for applicable large employers (generally, employers that may be liable for the shared responsibility tax if they fail to offer their full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan). Generally these reports seek information on whether the employer offers health coverage to its full-time employees, whether the coverage is affordable and provides minimum value, and which employees are enrolled in the coverage. Similar information would be provided on written statements to employees. Further, under Code §6055, insurers (including employers who self-insure) that provide minimal essential coverage to any individual during the calendar year must report certain health insurance coverage information to both the IRS and the covered individual for coverage provided on or after January 1, 2015 (the first information returns would be filed in 2016). Although not required, taxpayers are encouraged to voluntarily comply with section §6056 information reporting for 2014.
What is the look back period? How are the hours calculated over a 12 month period? When should we begin tracking hours?
The so-called "look-back stability period safe harbor" allows employers to select a period of time between three months and one year to use as a measurement period. If a given employee worked an average 30 hours a week during the measurement period, then the employer must treat the employee as a full-time employee during a corresponding stability period, regardless of the number of hours of service the employee actually works over that time period.
For ongoing employees, the Standard Measurement Period is set by the client and may run 3 to 12 months. For new employees the Initial Measurement Period begins on the first day of employment or optionally, the 1st of the month after the hire date. Again, this period may run from 3-12 months. Hours are calculated the same for both the Standard Measurement Period and Initial Measurement Period. Hours are summed by month and divided by the number of months in the measurement period.
Hours should be tracked as soon as the measurement period starts. In general, measurement should begin as soon as possible in order to determine current shared responsibility and give time to make adjustments to workforce, or offer insurance as necessary.
We hire a lot of part-time employees. It seems like we will have to have a lot of measurement periods, administrative periods and stability periods. Is that correct?
Yes, that is correct. For your group of “ongoing” employees there will be one Standard Measurement period, one Standard Administration period and one Standard Stability period. These time periods will continue from year to year.
However, for each new employee working variable hours, an Initial Measurement period, Initial Administrative period and Initial Stability period must be set up.
When the Initial Measurement period overlaps with the Standard Measurement period the new employee must also be evaluated for full-time status based on the Standard Measurement period. This simultaneous analysis provides for a transition from “new” employee to “ongoing” employee and depending on results the employee may experience a change in status and eligibility at the end of the standard measurement period.
Also, you could have different measurement periods for different categories of employees besides the salaried and hourly employees, such as: collectively bargained and non-collectively bargained employees, and employees of different entities.
How will I know when a penalty will be assessed?
The IRS will contact employers to let them know of potential liability and provide them with a period of time to research and respond before the liability is assessed and demand for payment is made. You shouldn’t expect that contact from the IRS for a given calendar year until after employees’ file their individual tax returns claiming the premium tax credit and after the due date for the employers to meet and file the information return identifying their full-time employees and describing the coverage that was offered (if any). (Based on an IRS FAQ #27)
If you are assessed a penalty, the IRS will send you a notice and demand letter that will include instructions on how to make the payment. The IRS is currently stating that the payment will not be included on any tax return filed by the employer. (Based on IRS FAQ #28)
Does the Employer Mandate apply to non-profit and government employers?
Yes. The shared responsibility requirements under the ACA apply to all employers. The only exclusion is employers with less than 50 full-time and full-time equivalent employees.
Are the Employer penalties a one-time penalty?
No, the determination relative to penalties would be made annually.
I understand that for every new variable hour employee I hire, I have to start a new Initial Measurement Period to determine their eligibility for the following stability period. What happens if I have a rehire situation, do I have to start another new Initial Measurement Period?
It depends on the facts and circumstances.
- If the rehire was off work (no hours of service) for more than 13 weeks, (26 weeks if an educational institution), the rehire will be treated as a new employee and a new initial measurement period must be set up.
- However, as an option, if your rehire was off work (no hours of service) for less than 13 weeks and their weeks off were greater than their weeks worked, the rehire may be treated as a new employee and a new initial measurement period may be set up.
- If the rehire was off work less than 13 weeks but their number of weeks off work was less than their weeks worked, the rehire will not be treated as a new employee and the employees hours will continue to be tracked under the original Initial Measurement Period.
If an employee has been out on FMLA, USERRA, or jury duty (special unpaid leave) do I treat them as a new-hire or a continuing employee when they return to work?
An hour of service is defined to include certain periods of time during which no duties are performed due to vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence.
An employee who has been out on FMLA, USERRA, or Jury duty is treated as having provided hours of service and is treated as a continuing employee exactly as any employee returning from vacation, holiday, or illness would be treated.
How do I determine whether an employee returning from “special unpaid leave” like FMLA, USERRA, or jury duty is to be considered full-time or part-time?
For purposes of applying the look-back measurement method, when a continuing employee returns from a special unpaid leave one of two averaging methods may be used to determine whether the employee is full-time or part-time.
The employer may:
- compute the average hours of service for the measurement period after excluding any special unpaid leave and using that average as the average for the entire measurement period; or
- treat the employee as credited with hours of service for any periods of special unpaid leave during the measurement period at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not part of the special unpaid leave.
As a large employer what action or actions would trigger my having to pay the “Employer Shared Responsibility” penalty payment?
An applicable large employer, (an employer with 50 or more full-time employees, or a combination of full-time and part-time employees that equal 50) is required to offer its full time employees affordable health coverage that provides a minimum level of coverage.
If at least one of the employer’s full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges (or Marketplaces) and the coverage offered by the employer was either not affordable, or did not provide minimum value, the employer may be subject to the penalty payment.
Will I be in danger of being subject to a penalty if one of my part-time employees receives a premium tax credit?
No. Part-time workers are not included in the penalty calculations. An employer will not pay a penalty for any part-time worker, even if that part-time employee receives a premium tax credit.
Are school Districts exempt from calculating hours?
School Districts are not exempt from calculating hours. Additional requirements apply to employment break periods for employees of an educational organization. For this purpose, an employment break period is a period of at least four consecutive weeks (disregarding special unpaid leave) during which an employee is not credited with an hour of service. The final regulations provide that the educational organization must apply one of the following methods to employment break periods related to or arising out of non- working weeks or months under the academic calendar. Accordingly, the educational organization must either determine the average hours of service per week for the employee during the measurement period excluding the employment break period and use that average as the average for the entire measurement period, or treat employees as credited with hours of service for the employment break period at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not part of an employment break period. However, the educational organization is not required to credit an employee in any calendar year with more than 501 hours of service for any employment break period (although this 501-hour limit does not apply to, or take into account, hours of service required to be credited for special unpaid leave). The rules governing employment break period for educational organizations apply only to an employee treated as a continuing employee upon the resumption of services, and not to an employee treated as terminated and rehired.
I have employees that may have 160 hours one month but then 80 hours the next month and fluctuate everywhere in between in other months. Does that impact the large employer determination or any other part of the ACA compliance?
Yes, this does impact the large employer determination. The employee would be counted as full-time in the month they exceed 130 hours of work and as part-time in any month their hours fall below 130 hours per month. If the variable hour employee has hours >120 but < 130 hours, the hours will be capped at 120. Then the sum of variable hours per month will be divided by 120 to get the number of full-time equivalents.
This situation does also impact the determination of whether an employee is full-time or part-time for purposes of offering coverage. To determine if an employee’s status during measurement period is full-time, the sum of monthly hours per variable hour employee is not capped. Each month’s actual hours worked are used to calculate an average hours per month for the entire measurement period.
Are overseas/international employees considered under the ACA?
Generally, the ACA only considers employees performing work in the US. Employees working only abroad should not be considered in the large employer determination, should not be included in any penalty calculation, and should not be considered for the employer mandate requirements.
Should hours worked by sub/contractors/temporary employee from staffing agencies be counted for the large employer determination?
Generally hours worked by sub/contractors/temporary employee from staffing agencies should be counted as hours worked for the agency or agencies not the client employer.
NOTE in final regulation: There are two scenarios that concern the Treasury Department and the IRS. One scenario is where the client employer hires an employee for 20 hours per week from one agency and for another 20 hours per week from another agency. The second scenario is where the client employer hires an employee directly for 20 hours per week and then hires the same employee through a temporary staffing firm for another 20 hours per week. Due to these concerns, the treasury Department and the IRS anticipate that future guidance will be published in the Internal Revenue Bulletin.
How do I determine whether my workers are full-time employees?
You identify your full-time employees based on each employee’s hours of service. An employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week.
130 hours of service in a calendar month may be used as the monthly equivalent of at least 30 hours of service per week under the final regulations.
We hire a large number of employees for every holiday season and during that time we have more than 50 employees. Does that make us an applicable large employer?
An employer is not considered to employ more than 50 full-time employees if the following is true:
- Its workforce exceeds 50 full-time employees for 120 days or less during the calendar year; and
- The employees in excess of 50 employed during the 120 day period are seasonal employees.
Seasonal employment customarily is 6 months or less. The employer is expected to use a reasonable good faith interpretation of seasonal employee.
Please clarify the definition of full time employee. Is it 40 hours or 30 hours a week?
In order to determine Full-time status for Large Employer Determination and the Full-time status of employees for Shared Responsibility purposes, "Hours of Service" must be determined as both evaluations are based on hours of service.
For employees paid on a non-hourly basis (such as salaried employees), an employer may calculate the actual hours of service using the same method as for hourly employees, or use a days-worked equivalency crediting the employee with eight hours of service for each day for which the employee would be required to be credited with at least one hour of service, or a weeks-worked equivalency whereby an employee would be credited with 40 hours of service for each week for which the employee would be required to be credited with at least one hour of service. This approach is the same as the equivalency rule for crediting hours of service under an employee pension benefit plan under DOL regulations at 29 CFR 2530.200b-3(e).
Regarding Large Employer Determination and Shared Responsibility, Section 4980H(c)(4) defines the term full-time employee to mean, with respect to any month, an employee who is employed on average at least 30 hours of service per week. The final regulations provide two methods for determining full-time employee status—the monthly measurement method and the look-back measurement method. Both methods use 30 hours as the threshold for determining full-time status.
Employers started downgrading Full time employees to Part-time hours to avoid participating in ACA. What are the resources employees have to report such behavior?
ERISA Section 510 provides the following:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. In the context of the employer mandate, plaintiffs are likely to argue that an employer’s workforce management efforts interfered with an employee’s right to health coverage. The most likely ERISA 510 claim would seem to involve an employee who averaged 30 hours a week previously.
The employee could also report to their UNION.
Except for office staff, our field caregivers are all hired on a PRN basis. As an agency staffing caregivers in people's homes, they can work as little as 4 hours a week to 60 hours a week with rarely the same hours each week. What timeframe is the best to determine the "large employer" test?
If there are no particular periods where hours are greater, the longer the measurement period the more dilute the average hours per month will be.
If we have an On-Call employee and some weeks they would work 40 hours/week, do we offer them insurance?
Guidance provided in the final rule, 79 FR 8551, anticipates that the Treasury Department and the IRS continue to consider additional rules for determining hours of service for purposes of section 4980H. The guidance then states that, until further guidance is issued employers of employees with on-call hours “are required to use a reasonable method of crediting hours of service that is consistent with section 4980H.”
Using a reasonable method of crediting this employee’s hours of service, such hours would be tracked during the employee’s measurement period and if found to work on average 30 hours per week the employee would be classified as FT and would be eligible for healthcare benefits at the start of the following stability period. In this case, the employer will have to look at the entire measurement period and determine the average hours.
Please provide clarification of requirements around student and temporary employees.
STUDENTS: Regarding the rules for determining hours of service for employees who are also students, special rules apply to those students on a federal work study program under which the student receives financial aid in the form of a federally subsidized work assignment. The federal work study program, as a federally subsidized financial aid program, is distinct from traditional employment in that its primary purpose is to advance education. To avoid having the application of section 4980H interfere with the attainment of that goal, the final regulations provide that hours of service for section 4980H purposes do not include hours of service performed by students in positions subsidized through the federal work study program or a substantially similar program of a State or political subdivision thereof.
However, the final regulations do not include a general exception for student employees. All hours of service for which a student employee of an educational organization (or of an outside employer) is paid or student employee of an educational organization (or of an outside employer) is paid or entitled to payment in a capacity other than through the federal work study program (or a State or local government’s equivalent) are required to be counted as hours of service for section 4980H purposes. With respect to internships and externships, services by an intern or extern would not count as hours of service for section 4980H purposes under the general definition of hours of service contained in the regulations to the extent that the student does not receive, and is not entitled to, payment in connection with those hours. However, excluding hours of service for which interns or externs receive, or are entitled to receive, compensation from the employer from the definition of hours of service for section 4980H purposes would be subject to potential misuse through labeling positions as internships or externships to avoid application of section 4980H. The final regulations do not adopt a special rule for student employees working as interns or externs for an outside employer, and, therefore, the general rules apply, including the option to use the look-back measurement method, as appropriate, or the monthly measurement method.
TEMPORARY EMPLOYEES: Regarding Temporary employees, the determination of whether an employee is a variable hour employee is made on the basis of the temporary staffing firm’s reasonable expectations at the start date. An employee may accordingly be classified as a variable hour employee if this categorization was appropriate based on the employer’s reasonable expectations at the start date, even if the employee in fact averages 30 or more hours of service per week over the initial measurement period.
Additional guidance on when a temporary staffing firm may treat an employee who is not working on assignments as having separated from service with the firm has been requested. Accordingly, until further guidance is issued, temporary staffing firms, like all employers generally, may determine when an employee has separated from service by considering all available facts and circumstances and by using a reasonable method that is consistent with the employer’s general practices for other purposes, such as the qualified plan rules, COBRA, and applicable State law. Taking into account the final regulations move to reduce the break-in-service period under the rehire rules from 26 weeks to 13 weeks for all employers that are not educational organizations.
What type of hours should be included when determining if the employee is working an average of 30 hours per week?
The final rule, 79 FR 8580 §54-4980H-1(24) defines Hour of Service as follows: (i) In general. The term hour of service means each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence (as defined in 29 CFR 2530.200b-2(a)). The rule specified certain excluded hours including “Bona fide volunteers”, “work-study program”, and “services outside the United States”. The rules for determining an employee’s hours of service are found at §54.4980H-3.
What forms must I use to file the information with the IRS required by the Affordable Care Act?
In its final information reporting regulations the Department of the Treasury identified the forms that will be drafted. The forms are as follows:
- If your company provides a self-insured plan it will report on form 1095-C, completing both sections to report the information required under sections 6055 and 6056.
- If your company provides insured coverage it will also report on Form 1095-C, but will complete only the section of Form 1095-C that reports the information required under section 6056.
- Section 6056 returns may be made by filing Form 1094-C (transmittal) and Form 1095-C (employee statement).
- In addition, certain Section 6055 reporting entities such as health insurance issuers, self-insured multiemployer plans, and providers of government-sponsored coverage, will report on Form 1095-B.
What are the 6055 and 6056 reporting requirements?
Section 6055 requires annual information reporting by health insurance issuers, self-insuring employers, government agencies, and other providers of health coverage. Section 6056 requires annual information reporting by applicable large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
Are the 6055 and 6056 requirements to report in 2015 still in effect?
Yes. The final regulations indicate the guidance given in Notice 2013-45 still stands. Notice 2013-45 provides that the employer shared responsibility provisions under section 4980H (and the information reporting provisions) will become effective for 2015. However, employers, insurers, and other reporting entities are encouraged to voluntarily comply with these information reporting provisions for 2014 in preparation for the full application of the provisions for 2015. Since reporting under §§ 6055 and 6056 will be optional for 2014, no penalties will be applied for failure to comply with these information reporting provisions for 2014.
Are any new regulations expected regarding the FLSA notices given out to employees?
Beginning January 1, 2014, individuals and employees of small businesses will have access to affordable coverage through a new competitive private health insurance market – the Health Insurance Marketplace. The Marketplace offers “one-stop shopping” to find and compare private health insurance options. Open enrollment for health insurance coverage through the Marketplace began October 1, 2013. Section 1512 of the Affordable Care Act creates a new Fair Labor Standards Act (FLSA) section 18B requiring a notice to employees of coverage options available through the Marketplace. On May 8, 2013, the Department of Labor issued Technical Release, 2013-02, which provides temporary guidance regarding the notice requirement under FLSA section 18B. This section provides temporary guidance on what the Department will consider as compliance with FLSA section 18B, and this guidance will remain in effect until the Department promulgates regulations or other guidance. Future regulations or other guidance on these issues will provide adequate time to comply with any additional or modified requirements. That being said, yes, I think we should expect additional guidance and or final regulations regarding these notices.