The Patient Protection and Affordable Care Act (the “Act”) provides that employers who employ more than 50 full-time employees must offer full-time employees and their dependents coverage that is “affordable” and provides “minimum value” (as defined in the Act) or pay a penalty. The number of fulltime employees determines the amount of the penalty an employer who does not offer such coverage must pay. If an employer fails to offer all of its full-time employees any coverage and one such employee receives a premium tax credit or cost-sharing reduction for health insurance purchased through a health insurance exchange, the employer is subject to a penalty of $2,000 per year for each full-time employee in the employer’s workforce over the first 30. If an employer offers coverage that is either “unaffordable” or fails to provide “minimum value” the employer is subject to a penalty of $3,000 per year for each full-time employee who receives a premium tax credit or cost-sharing reduction from a health insurance exchange (or if less $2,000 for each full-time employee in the employer’s workforce over the first 30). This “play or-pay” penalty goes into effect in 2014.
Identifying full-time employees will be critical as employers determine which employees must be offered coverage to avoid a penalty. Under the Act, an employee who works an average of at least 30 hours per week is full-time. Recently released IRS Notice 2012-58 provides guidance and voluntary safe harbors that employers can use to determine whether employees who work variable hours or seasonally are full-time for purposes of the “play or-pay” penalty. Keep in mind that employees who are reasonably expected to work fulltime must be treated as such, even if the employer follows the voluntary safe harbors.
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