[author: Tracy Morley, XpertHR Legal Editor]
The IRS released guidance on how to determine a full time employee under the employer responsibility provisions of the Affordable Care Act (ACA), via +Notice 2012-58. Concurrently, the Departments of Labor (DOL), Health and Human Services (HHS) and Treasury issued +Notice 2012-59 providing guidance on how to implement the 90-day waiting period limitation under section 2708 of the Public Health Service (PHS) Act.
Determination of Full Time Employment Status
Under the employer shared responsibility provision of the ACA, large employers may face a penalty if they do not provide affordable, minimum essential coverage to their full time employees. The new guidance expands the safe harbor methods for large employers to use when determining which employees are considered full time employees for purposes of the shared responsibility provisions of the ACA. Specifically, +Notice 2012-58 provides:
Safe Harbor for Ongoing Employees - Under the safe harbor method for ongoing employees, employers may determine full time status by looking back over the standard measurement period. The standard measurement period is chosen by the employer, and must be at least three, but no more than 12 consecutive calendar months. For employees determined to be full time during the standard measurement period the stability period is a period of at least six consecutive calendar months and no shorter than the standard measurement period. For employees who are not considered full time, the stability period cannot be longer than the standard measurement period.
Safe Harbor for New Employees: Variable Hour and Seasonal Employees - A new employee is considered a variable hour employee if "based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week." Under the safe harbor method for variable hour and seasonal employees, employers may use a look back period of between three and 12 months to decide whether new variable hour or seasonal employees are full time employees. The stability period for variable hour and seasonal employees is the same as for ongoing employees.
Administrative Periods - Employers may use an administrative period of up to 90 days (between the measurement period and associated stability period) to determine eligibility and notify and enroll employees.
Different Categories of Employees - Employers may use measurement periods that differ in either length or in their starting and ending dates for different categories of employees, including:
Collectively and non-collectively bargained employees;
Salaried and hourly employees;
Employees of different entities; and
Employees located in different states.
The new guidance also:
Provides an explanation for how the measurement and stability period rules apply during the transition from new employee to ongoing employee; and
Provides a number of examples that illustrate how the safe harbor provisions apply.
Employers may (but are not required to) follow the safe harbor provisions in +Notice 2012-58 through 2014, and will not be required to comply with subsequent guidance that is more restrictive until on or after January 1, 2015.
90-Day Waiting Period
Section 2708 of the PHS Act provides that for plan years beginning after January 1, 2014, group health plans or health insurance issuers may not impose any waiting period that exceeds 90 days. In 2004, the PHS Act regulations defined a waiting period as "the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective."
The temporary guidance reiterates and clarifies the definition of waiting period and its application to variable hour employees where a specified number of hours of service per period is a plan eligibility condition.
This guidance will be in effect at least through the end of 2014.
Comments on both Notices are requested. Anyone wishing to submit comments should do so no later than September 30, 2012 in accordance with the instructions provided in each Notice.
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