Beginning January 1, 2015, the large employer mandate of the Affordable Care Act (ACA) requires that all full-time employees be offered minimum essential, affordable coverage. Penalties will be assessed for each month that a large employer fails to offer minimum affordable coverage to its full-time employees.
Under the ACA, a full-time employee has at least an average of 30 hours of service per week, or at least 130 hours of service per month. Hourly employees can be tracked on an actual hours basis. Other rules apply to salaried and other non-hourly employees. Full-time status is determined each month.
In order to reduce the administrative burden of tracking monthly employee hours, the IRS has issuance alternative guidance for determining full-time employee status. Under these safe harbor rules, a large employer can choose a “measurement period” of between 3 to 12 months during which it determines which employees meet the hours of service threshold for full-time status. The employer than establishes a follow-on “stability period” that is at least six months long and no shorter than the measurement period. For those employees who are determined to be full-time during the measurement period, the employer must treat them as full-time employees during the entire stability period, even if they cease to qualify as a full-time employee during the stability period. For those employees who are not determined to be full-time during the measurement period, the follow-on stability period can be no longer than the measurement period. Other rules apply for new and variable hour employees.
Needless to say, the alternative safe harbor options have their own administrative challenges. However, they may be easier to address than the month by month calculations that might otherwise be required. If so, large employers must start planning well in advance of the January 1, 2015 implementation date for the new coverage mandates. Waiting until the proverbial last minute may eliminate these safe harbor options.