Health care reform
Starting in 2014, employers with 50 or more full-time equivalent employees will be required to provide full-time employees with affordable health care coverage that meets minimum requirements, or pay an annual penalty (known as the “shared responsibility” penalty). The health care reform act defines “full-time” as working 30 hours per week in any given month. Employers asked for guidance about applying this definition to variable-hour and seasonal employees.
New guidance issued in IRS Notice 2012-581 discusses a voluntary “safe harbor” method for determining whether these employees should be classified as full or part time — and when health insurance coverage for those deemed full-time must begin to avoid the shared responsibility penalty.
A new employee is a “variable” employee if, based on the facts and circumstances at the employee’s start date, it is unclear whether the employee is reasonably expected to work an average of at least 30 hours per week.
Under the new IRS guidance, variable and seasonal employees start out in a “measurement period,” during which the hours they actually work are recorded. Then there’s an “administrative period.” In this period, the employer analyzes the employee’s hours, determines if the employee worked full or part time during the measurement period, and enrolls the employee in the health care plan (if he or she is eligible).
Finally, there is a “stability period,” during which the employee is considered and treated as full time or part time, as determined during the measurement period, even if his or her hours change during the stability period. Hours worked during the stability period are also averaged into the next measurement period which runs concurrently with the stability period. Details about these periods, for ongoing employees, are below:
The safe harbor method for ongoing variable-hour employees
As long as the above requirements are met, measurement or stability periods can have different start dates, end dates or lengths for collectively bargained and non-collectively bargained employees, salaried and hourly employees, employees of different entities and employees located in different states.
Employers can rely on the IRS’s safe harbor guidance through 2014. This guidance document requests public input on a variety of topics that will be used to help the agency issue additional guidance and develop final rules. These issues include: