Health Care Reform Determining Full-Time Employee Status

Transcription

1 Health Care Reform Determining Full-Time Employee Status

2 HR Advocate s Resources Organization of regional brokers to which BIG belongs; provides Client Resource Center, Legal Resources, and other key tools to help our clients manage their benefits program Proskauer Rose - Legal resource to ProSential Group members and clients HR Resource Center Contains legal updates, recorded webinars, compliance resources

3 Introduction IRS Notice addresses when employees must be treated as Full Time under the Act s employer shared responsibility. Effective for plans renewing on or after January 1, 2014 Impacts employers with >50 full-time equivalent employees (FTE) If >50 FTEs, must offer affordable coverage with a minimum value Employees averaging 30+ hours/week = Full Time

4 Employer Penalties 50+ Employees If employer doesn t offer coverage AND one full-time employee receives subsidized coverage through an Exchange: Penalty of $2,000/year/full-time employee, excludes the first 30 employees. Penalty is assessed monthly ($ per full time employee per month) If employer does offer coverage, but coverage is deemed unaffordable (employee s contribution is more than 9.5%) OR if plan s benefit is less than 60% AND at least one EE receives a tax credit: Penalty is lesser of $3,000/year/full-time employee for each employee receiving the credit through Exchange or $2,000/year/full time employee. ($250 per full time employee per month).

5 Introduction Full-Time Employees Reasonably expected to work 30 or more hours per week on hire date No need to track these employees Variable Hour & Seasonal Employees Hours may fluctuate above and below 30 hours per week Part time employees (working less than 30 hours/wk) must be measured

6 Safe Harbors Ongoing Employees New Employees

7 Safe Harbors - Definitions Measurement Period Employers set a specified measurement period to determine employees full or parttime status o 30 hours per week, or 130 per month = FT Measurement period must be between three and 12 months o May differ for ongoing employees and new hires

8 Safe Harbors - Definitions Administrative Period (Optional) Allows time for: o Evaluation and calculation of eligibility o Communicate plan details to newly eligible employees o Administer enrollment changes Must not exceed 90 days Cannot create a lapse in employee coverage May differ for ongoing employees & new hires

9 Safe Harbors - Definitions Stability Period The period of coverage for which the employee will be covered or excluded based on the results from the measurement period. Must be the greater of six months or the exact length of the measurement period and the same for ongoing employees and new hires. MUST BE THE SAME FOR NEW HIRES & ONGOING EMPLOYEES

10 Safe Harbors Clarification These periods can vary in length and/or in start and end dates for specific groups of employees: Collectively bargained employees vs. non collectively bargained employees Salaried vs. hourly employees Employees working in different entities Employees working in different states

11 Safe Harbors - Definitions Ongoing Employees those who have worked for the employer for a period of at least one standard measurement period

12 30 or More Hours Per Week Initial/Standard Measurement Period Period of time between 3-12 months Administrative Period Up to 90 days for evaluation and communication Stability Period Period of at least 6 consecutive calendar months, no shorter than Initial/Standard Measurement Period, beginning after Standard and Administrative Period Total of Initial Measurement Period and Administrative Period can t exceed 13 months plus remainder of month if anniversary falls in middle of month Employee Type Definition Penalty / Parameters Full-Time Ongoing Always average 30+ hours/week Employer must offer affordable coverage, 90 day or less waiting period. No measurement required. Full-Time New Hire Expected to always average 30+ hours/week Employer must offer affordable coverage, 90 day or less waiting period. No measurement required. Part-Time Always average < 30 hours /week If coverage is offered to employees working <30 hours per week must have 90 day or less waiting period; but no applicable employer penalty. Measurement required. Variable Seasonal Employee Employee hours vary such that employer can t determine whether employee is reasonably expected to work at least 30 hours per week Worker who performs labor or services on a seasonal basis (less than 120 days a year), including (but not limited to) retail workers employed exclusively during holiday seasons Eligibility determined based on measurement process. Treat as variable employee for measurement and stability process

13 Ongoing Employees 12-Month Initial Measurement Period followed by 3 Month Administrative Period Cycle One Initial Measurement Period 10/11/12 9/30/2013 Admin Period 10/1/13 12/31/13 Stability Period 1/1/14-12/31/14 Cycle Two Standard Measurement Period 10/1/13 9/30/14 Admin Period 10/1/14 12/31/14 Stability Period 1/1/15 12/31/15 NOTES: Stability Period in Cycle One overlaps Admin Period in Cycle Two, Ensures no lapse in coverage for ongoing employees as employer determines eligibility

14 Safe Harbor - New Employees Employer must establish separate initial measurement/stability periods for new hires May overlap with standard measurement/stability periods for ongoing employees

15 Safe Harbor New Employees New Hires Expected to Work Full Time: if a new employee is reasonably expected to work at least 30 hours per week Employee is considered full time and eligible for benefits Employers must offer coverage that begins no later than 91 days from hire date (hard cutoff) No measurement required

16 Safe Harbor New Employees Initial measurement and stability periods will vary for each variable hour/seasonal new employee Based off of initial hire date Employers can choose to start all initial measurement periods at the beginning of the next calendar month following date of hire o Avoids the possibility of 365 separate measurement periods

17 Safe Harbor New Employees Initial measurement period + administrative period cannot exceed13 months, plus a fraction of a month (or under 14 months) New employees initial stability periods must be the same as standard stability period for ongoing employees (consistency is key!)

18 Safe Harbor New Employees If: Employee completes initial standard measurement period Then: Employee is tested for full time status If: Employee meets requirements of FT Then: Employee must be treated as FT for entire stability period* *Regardless if they dip below minimum threshold during stability period!

19 Safe Harbor New Employees Coverage for initial stability period is guaranteed even if employee fails during ongoing employee measurement. If a new hire employee is tested with ongoing employees and passes after failing during new hire testing, coverage is extended as an ongoing employee.

20 Variable Hour Example 12-Month Initial Measurement Period followed by 1+ Partial Month Administrative Period VARIABLE EE Admin Period 3/11/14 3/31/14 Initial Measurement Period 4/1/14 3/31/15 Admin Period 4/1/15 4/30/15 Stability Period 5/1/15 4/30/16 ONGOING EE Standard Measurement Period 10/1/14 9/30/15 Admin Period 10/1/15 12/31/15 Stability Period 1/1/16 12/31/16 Facts: Employee is new variable Ongoing employees must average 30 hours per week for eligibility Employer chooses Standard Measurement Period of October 1 st -September 30 th for ongoing employees Employer chooses Administrative Period of October 1 st -December 31 st for ongoing employees Employer chooses Stability Period of January 1 st -December 31 st for ongoing employees Situation: Initial Measurement Period begins first of the month following date of hire Initial Admin Period is from date of hire to the first of the next month and a second admin period is the month following the end of the measurement period Employee is hired on March 11, 2014 Employee works an average of 30 hours per week during Initial Measurement Period Conclusion: Employee is eligible for coverage during Stability Period 5/1/15-4/30/16 Initial Measurement Period does not exceed 12 months Administrative Period does not total more than 90 days Combined Initial Measurement Period and Admin Period is less than 14 months Employer is not subject to penalty Employer must test employee again for October 1, 2014 through September 30, 2015 (Employer s first Standard Measurement Period that begins after Employee s start date)

21 Considerations Total time considerations (Measurement/Admin/Stability) How does it align with corporate strategy? Company administrative challenges o Are you tracking hours now? o Who will be conducting eligibility audit? etc.

22 Considerations Advantages of 12 month Measurement Period Longer period for hour averaging Advantages of shorter Measurement Period Considers seasonal hour variations Stability Period Match with Plan year 6 months make sense if using a shorter period for seasonal fluctuations

23 Short Measurement Scenario 6-Month Initial Measurement Period followed by 3 Month Administrative Period Cycle One Initial Measurement Period 1/1/13 6/30/2013 Admin Period 7/1/13 9/30/13 Stability Period 10/1/14-3/31/15 Cycle Two Standard Measurement Period 7/1/13 12/31/14 Admin Period 1/1/15 3/31/15 Stability Period 4/1/15 9/30/ Retail Employer Weekly Hours January February March April May June July August September October November December 20- hour Average 40- hour Average NOTES: This employers average hours over a 12 month period are 30 per week. By using a shorter measurement period, the employer is able to eliminate benefits eligibility for half the year.

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