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Determining Full Time Employee Status Under PPACA

Determining Full Time Employee Status Under PPACA. How do employers manage health benefits for temporary, seasonal, and other variable employees?. PPACA—Who Is A Full-Time Employee?. What is full-time under PPACA?

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Determining Full Time Employee Status Under PPACA

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  1. Determining Full Time Employee Status Under PPACA

    How do employers manage health benefits for temporary, seasonal, and other variable employees?
  2. PPACA—Who Is A Full-Time Employee? What is full-time under PPACA? FTE (Full-Time Employee) = average of 30 hours or more per week or 130 hours per month ≠ Full-Time Equivalent Employee Rules for identifying full-time employees ≠ rules for determining ALE (Applicable Large Employer) status Penalties assessed monthly – so identify monthly (or using a look-back measurement period – described later) Measuring FT status can result in complex recordkeeping over time
  3. PPACA—Who Is A Full-Time Employee? Hours of Service Rules Hours of service include all PAID hours: vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence Hours worked outside US disregarded if not US source income If not full-time and actual hours not tracked, employer must: Use actual hours of service and hours for which payment is made or due, or Use equivalency method 8 hours of service per day if employee works at least one hour, or 40 hours of service per week if employee works at least 1 hour per week Method must generally reflect actual hours worked
  4. PPACA—Who Is A Full-Time Employee? Hours of Service Rules Cont. Employers with: Adjunct faculty members Employees paid on commission Transportation employees (e.g., airline pilots) Other analogous employment positions May use a "reasonable method" for crediting hours of service Adjunct faculty: a reasonable method would account for hours necessary to perform the employee's duties, such as time spent preparing for class Traveling salesperson paid on commission: a reasonable method would account for travel time to/from appointments
  5. PPACA—What about variable employees? Safe-Harbor for Employers of Variable/Seasonal Employees Employers have the option to use a look-back measurement period of 3 to 12 months to determine whether new and ongoing variable hour employees or seasonal employees are full-time, without being subject to penalties for this period with respect to those employees An “ongoing employee” is generally an employee who has been employed by the employer for at least one complete “standard measurement period”* - If the employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employer treats the employee as a full-time employee during a subsequent “standard stability period”* A new employee is a variable hour employee if, based on the facts and circumstances upon hire, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week *Defined in next slides
  6. PPACA—Look-Back Method Optional Look-Back Measurement Method Method for determining if variable-hour employees are (or have become) full time employees for purposes of PPACA requirements Allows for a 3 to 12-month “look-back” period to determine status Optional method for determining full-time status uses “measurement periods” "Initial Measurement Period" for new employees "Standard Measurement Period" for ongoingemployees
  7. PPACA—Look-Back Method Ongoing Employees – Measurement Period Definitions "Standard Measurement Period"— employer defined period of 3 to 12 consecutive calendar months Employees determined full-time in standard measurement period are treated as full-time during the "Standard Stability Period" if he/she remains employed by employer—regardless of hours worked during the standard stability period Standard stability period = longer of 6 months following the standard measurement period or the number of months in the measurement period (taking into account any applicable "Administrative Period“*) *Defined in next slides
  8. PPACA—Look-Back Method Ongoing Employees – Measurement Period Definitions Employers can choose measurement, stability and administrative periods for ongoing employees—but determination must be uniform and consistent for all employees in same category Four permissible categories: Collectively bargained employees and non-collectively bargained employees; Each group of collectively bargained employees covered by a separate collective bargaining agreement; Salaried employees and hourly employees; and Employees whose primary place of employment are in different States
  9. PPACA—Look-Back Method Administrative Period for Ongoing Employees Not more than 90 days between end of standard measurement period and start of standard stability period Admin Period may neither reduce nor lengthen the measurement period or the stability period Must overlap with the prior standard stability period, so that ongoing full-time employees will continue to be offered coverage during the administrative period Example – Ongoing EEs: Admin Period No More than 90 days 10/15/12 – 10/14/13 Standard Measurement Period (SMP) Calendar Year 2014 Standard Stability Period (SSP) Admin Period 10/15/14 – 12/31/14 Overlaps prior SSP
  10. PPACA—Look-Back Method New Employees No assessment if coverage offered within first 90 days – coordinates with the 90 day waiting period requirement Determination of Variable Hour Employee based on facts and circumstances at time of hire – determination cannot be made whether employee is reasonably expected to work on average at least 30 hours per week Example: retail worker hired full-time for the holiday season who is reasonably expected to continue working after the holiday season but is not reasonably expected to work full-time for the portion of the initial measurement period remaining after the holiday season
  11. PPACA—Look-Back Method New Employees If look-back measurement method is used for ongoing employees, can be used for new variable and seasonal employees (3 to 12 month look-back) Must be consistent with rules for ongoing employees Except:“Initial measurement period” and “administrative period”combined may not extend beyond the end of the month beginning on or after the employee's one-year anniversary (totaling, at most, 13 months and a fraction of a month) Employers that wish to use a longer administrative period may shorten measurement period to 11 months
  12. PPACA—Look-Back Method Initial Measurement Period & Associated Stability Period The employer measures the hours of service completed by the new employee during the initial measurement period (IMP) and determines whether the employee worked an average of 30 hours of service per week The initial stability period (ISP) for such employees must be the same length as the stability period for ongoing employees As in the case of a standard measurement period, if an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least 6 consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period)
  13. 12-Month IMP & ISP Example Can have Admin Period up to 90 days, but no more than 30 days w/ 12-month IMP Hire Date 7/1/14 NEW HIRE can be termed from plan if NOT FT based on SMP (eff. 6/30/16) 7/1/14 – 6/30/15 Initial Measurement Period (IMP) for NEW HIRE 7/1/15 – 6/30/16 Initial Stability Period (ISP) - NEW HIRE COVERED FOR FULL PERIOD 10/15/14 – 10/14/15 Standard Measurement Period (SMP) for ALL EEs Admin Period (OE) 10/15/15 – 12/31/15 Calendar Year 2016 Standard Stability Period (SSP) for the same EE 2015 SSP 1/1/16 FT status evaluated for all EEs including new hire (10/15) Two timelines above run simultaneously RULE: if the employee works FT during his IMP but not during the SMP, the employee is eligible for coverage during the entire ISP, even though he wouldn't be eligible for coverage in the 2016 SSP
  14. PPACA—Transition Relief Limited Transitional Relief for High Turnover Positions Until January 1, 2015, employers can make reasonable assessments based on the expectation that particular employees will not be on-going (not complete the initial measurement period) based on the facts and circumstances After January 1, 2015, employers must assume that employees (other than seasonal) will remain employed for the entire initial measurement period
  15. PPACA—Status Changes & Leave Changes in Employment Status RULE: An employee who experiences a change in status during his initial measurement period is generally treated as a full-time employee as of the first day of the 4th month following change in status Or by the start of the initial stability period, if sooner and the employee worked full-time during the initial measurement period Rule applies only to new variable hour and seasonal employees A change in status for an ongoing employee NEVER changes status as a full-time employee or non full-time employee during the stability period
  16. PPACA—Status Changes & Leave Employees Rehired or Returning From a Leave of Absence Break of 26 consecutive weeks or more may result in treatment as a new employee Parity Rule: If break is between 4 and 26 weeks and exceeds length of pre-break employment, may treat returning employee as new employee Employee treated as a continuing employee returns to the measurement and stability period that would have applied had the employee not been on leave Continuing employees must be reinstated as soon as possible upon resumption of service
  17. PPACA—Status Changes & Leave Employees Returning from FMLA or USERRA For periods of unpaid FMLA or USERRA, and for unpaid leave for jury duty ("special unpaid leave"), average hours per week exclude the special unpaid leave period — employer must use average for paid hours as average for entire measurement period Alternatively, employees may be credited with hours of service for special unpaid leave at same rate as for non-special unpaid leave

  18. PPACA — Determining Full Time Employee Status

    Reference IRS Notice 2012-58 for more detailed guidance Legal opinions on particular situations are available through Potomac’s partner, Proskauer Rose LLP Contact your VP of Group Benefits at Potomac for further information
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