ISSUED 12/30/2020
The Affordable Care Act (ACA) provides applicable large employers with two options for determining an employee’s status as full-time or part-time. Under the ACA, an applicable large employer must offer coverage to substantially all of its full-time employees. Full-time is defined as an employee averaging 30 or more hours per week or 130 hours per month. For any employee whom at the time of hire, the employer anticipates will work full-time hours, the employer must offer coverage no later than 90 days from the employee’s date of hire. This rule generally applies regardless of whether the employee is temporary.
When the employer employs variable hour and part-time employees and is unsure at the time of hire whether the employee will work full-time hours, special rules apply. With variable hour employees and certain seasonal employees, instead of offering coverage no later than 90 days from the employee’s date of hire, the employer is permitted to use one of the two measurement methods to determine the employee’s status. Note: Generally, the employer must apply the same method to all employees.
Monthly Measurement Method
Under the monthly measurement method, an applicable large employer determines each employee’s status as a full-time employee by counting the employee’s hours of service for each calendar month.
Example:
• Employer Z hires Employee A on January 1, 2020.
• Employee A averages 20 hours of service per week each month in 2020.
• On January 1, 2021, Employee A becomes a full-time employee subject to a 90 day waiting period.
• Effective April 1, 2021, Employer Z offers Employee A coverage.
• Employee A averages 40 hours of service per week for each calendar month in 2021 until July.
• Employee A has zero hours of service June 25, 2021, to August 26, 2021, during a special unpaid leave.
Employer Z is not subject to an employer mandate penalty for failing to offer coverage to Employee A during each month of 2020 because Employee A was not a full-time employee. Because Employee A’s break in service is less than 13 consecutive weeks, Employer Z may not treat Employee A as having terminated employment and re-apply any completed waiting period. Although the nine consecutive weeks of zero hours of service constitute special unpaid leave, the averaging method for periods of special unpaid leave does not apply under the monthly measurement method. Therefore, because Employee A had zero hours of service, Employer Z may treat Employee A as a non-full-time employee for July 2021 and August 2021.
Look-Back Measurement Method
Under the look-back measurement method, an applicable large employer determines each employee’s full-time employee status by looking back at a measurement period of at least three months but not more than 12 months, as determined by the employer. Upon completion of one measurement period, another measurement period begins. Key periods under this method include:
• Measurement Period (3-12 Months): time period to monitor and track employee hours
• Administrative Period (Up to 90 Days): time period to identify and enroll eligible employees
• Stability Period (6-12 Months): time period employer must maintain employee’s eligibility status
Example – Ongoing Employee:
• Employee A is an ongoing employee hired January 1, 2018.
• Employer Z uses a 12 month standard measurement period set up to align with its calendar plan year.
• Employee A works 35 hours per week from October 2019 to August 2020.
• Employee A works 29 hours per week from September 2020 to November 2020.
• In June 2021, Employer Z reduces Employee A’s hours to 15 hours per week for the remainder of the year.
From October 15, 2019, to October 14, 2020, Employer Z tracks and maintains records of Employee A’s hours worked, including hours paid and hours entitled to payment. During the administrative period, Employer Z calculates an average of Employee A’s hours during the measurement period. Based on this calculation Employer Z determines that Employee A averaged more than 30 hours per week during the measurement period, and deems Employee A full-time. Employer Z offers Employee A qualifying coverage for the calendar plan year coinciding with the stability period. When Employee A has a reduction in hours in June 2021, Employer Z continues to offer coverage to Employee A until the end of the stability period.
Example – New Hire:
• Employee A is a new employee hired March 1, 2020.
• Employer Z uses a 12 month initial measurement period starting on the employee’s date of hire.
• Employer Z uses a 1-month initial administrative period to comply with the ACA 13-month rule.
• Employee A works 35 hours per week from March 2020 to December 2020.
• Employee A works 29 hours per week from January 2021 to March 2021.
• In June 2021, Employer Z reduces Employee A’s hours to 15 hours per week for the remainder of the year
From March 1, 2020, to February 28, 2021, Employer Z tracks and maintains records of Employee A’s hours worked, including hours paid and hours entitled to payment. During the initial administrative period, Employer Z calculates an average of Employee A’s hours during the initial measurement period. Based on this calculation Employer Z determines that Employee A averaged more than 30 hours per week during the initial measurement period, and deems Employee A full-time. Employer Z offers Employee A qualifying coverage for April 1, 2021, to March 31, 2022. When Employee A has a reduction in hours in June 2021, Employer Z continues to offer coverage to Employee A until the end of the stability period. Employer Z is not subject to an employer mandate penalty for failing to offer coverage to Employee A during the initial measurement and administrative period because Employee A was in a limited non-assessment period.