Affordable Care Act Challenges with Part-time, Variable, and Temporary Employees. By Eliza Read

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1 Affordable Care Act Challenges with Part-time, Variable, and Temporary Employees By Eliza Read

2 Employer Mandate Beginning in 2015 employers with 100+ Full-time or FTE employees (50 or more beginning in 2016) must offer affordable health insurance that provides minimum value to full-time employees and their dependents, or be subject to penalties.

3 Penalties for Improper Classification For covered ALE s, failure to correctly classify employees could trigger the no coverage penalty for non-covered full-time employees; $2,000 for each eligible non-covered fulltime employee (there is an allowance for error); 70% coverage required in 2015, 95% coverage in 2016.

4 Common Questions How do we determine whether we are an ALE? How do we make sure we have correctly identified all benefit-eligible employees? What if we make a mistake? What if an employee s hours change? What if we don t know how many hours an employee will work? How do we account for summer and holiday breaks? How can we make this simpler to implement?

5 How do we determine whether we are an ALE? Calculate the average number of full-time equivalent employees on business days in the preceding year Full-time employees + FTE s FTE: All employees (including seasonal workers) who were not employed on average at least 30 hours of service per week for a calendar month in the preceding calendar year are included in calculating the employer's FTEs for that calendar month. There are many nuances to the calculation.

6 How do we make sure we have correctly identified all benefit-eligible employees? The ACA Recognizes four types of employees: Full Time Part-Time Seasonal Variable Hour All employees will fall into one of these categories.

7 What About Contract Workers and Re-hires? Whether a contract worker is your employee, an independent contractor, or an employee of a staffing company is determined by applying the common law rules. Re-hires must have a 26 week (13 weeks for regular employers) continuous break in service to avoid including their prior hours in the employment status determination.

8 Full Time Employees Employees who are expected or hired to work 30+ hours a week, or 130+ hours per month. Can be short-term employees. An employee may start out as a variable hour and become a full-time employee. If you are an ALE, they are eligible for coverage.

9 Part-Time Employees Employees who work less than 30 hours per week or less than 130 hours per month. Generally not eligible for coverage, but hours will (most likely) be included in FTE calculation.

10 Seasonal Employees Work less than 120 days per year (modified rule for academic year) They can be excluded from coverage They count towards FTE s

11 Variable Hour Employees Fluctuating weekly schedule such that it cannot be easily determined whether the employee will average 30 hours per week or 130 hours per month; employed for at least 120 days per year; Must be tracked to determine whether they will be eligible for coverage; Hours will be included in FTE calculation; Status may change during period of employment; An employee with a fluctuating schedule who is hired to work 30+ hours per week or 130+ hours per month IS NOT a variable hour employee.

12 Categorize the Easy Ones Full-time employees are benefit eligible Part-time employees are not benefit eligible Seasonal employees are not benefit eligible Variable hour employees may be benefit eligible

13 Evaluate Variable Hour Employees Lookback Measurement Period Lookback Period Stability Period Administrative Period New vs. Ongoing Variable measurement periods allowed under some circumstances Monthly Measurement Period

14 Lookback (Safe Harbor) Method Lookback & Stability Period Calculations Lookback Period choose length. Stability Period look back Period (at least six consecutive months, up to twelve consecutive months). Administrative period (up to 90 days, overlapping with stability Period). Orientation/probationary period may be allowed. If Employee worked 30+ hours a week during look back, will be considered full time during subsequent stability period.

15 Monthly Measurement Period Track Actual Hours Worked Potential issue with employees potentially falling in and out of coverage, and logistics of offering COBRA coverage and then re-enrolling over short periods of time.

16 Measurement Period Rules Presumed vs. Actual Time Worked this can be a trap for the unwary Employees paid on an hourly basis must be tracked by actual hours Salaried employees may be tracked by actual hours, or by a days-worked or weeks-worked equivalency. Equivalency methods are not available for all types of employees. If you determine that the employee is classifiable, the employee is no longer subject to monitoring

17 What About Seasonal and Holiday Breaks Academic calendar breaks are treated in one of two ways: Apply the average hours to the time off; Ignore the time off. Either way, it should not change the employee s classification

18 When do you have to offer coverage? For new full-time employees: no later than the first day of the fourth full calendar month of employment For Variable Hour Employees: Using monthly method first day of calendar month following a 3 month period beginning with the first full month in which an employee averages 30 hours per week. Using lookback method at commencement of stability period

19 Implementation Strategies Review your policies to insure compliance with ACA. Note that under current ACA, Full Time Employment is 30 hours per week. Memorialize the measurement method(s) you will use and provide basis if necessary. Do you need to modify your budget due to increase in benefit eligible employees? Do you need to increase HR staff? Are there alternatives to avoid uncertainty or unnecessary increase in costs?

20 Strategies that may Limit Uncertainty Consider adding a fixed number of full time or FTE substitutes that will be your first on-call staff option. Consider modifying job descriptions or staffing polices such that a substitute cannot work more than three days per week. Implement accurate and timely tracking to avoid exceedance of the 120 hour limit or of the 30/130 rule. Insure that HR staff is educated about the impact of the ACA. If you are uncertain, ask questions ahead of time.

21 Courtesy of Timothy Richards Any Questions?