This blog post was authored by Jessica R. Frier
Full implementation of the Affordable Care Act’s (ACA) Employer Shared Responsibility provisions is quickly approaching. The Employer Shared Responsibility provisions generally go into effect on January 1, 2014, and apply to all large employers (50 or more full-time employees, including full-time equivalents). A full-time employee who obtains subsidized health coverage through the exchange (aka Marketplace) could trigger a penalty to his/her employer. The IRS will assess penalties to employers that fail to offer affordable health coverage that provides minimum value to substantially all of their full-time employees and their dependent children (up to age 26). In 2014 if an employer takes steps to offer coverage to dependent children of full-time employees, then an employer will not be penalized for failure to offer such coverage. However, in 2015 an employer may be exposed to penalties for failure to offer coverage to dependent children of its full-time employees.
Employers will need to determine which employees are “full-time” in order to manage exposure to the penalties. ACA defines a “full-time” employee for purposes of the penalties as one who averages 30 or more hours per week.
The IRS will impose penalties on a month-by-month basis, unless employers adopt the optional Look Back Measurement Method Safe Harbor, which allows employers to determine whether an employee is full-time or part-time over the course of a longer period (i.e. up to one year). Large employers with numerous seasonal, variable hour or temporary employees who average over 30 hours of service per week in any given month will likely benefit by adopting the Look Back Measurement Method Safe Harbor.
For employers who adopt the Look Back Measurement Method Safe Harbor, proposed regulations provide transition relief for 2014. The transition relief allows an employer to use a period of at least six consecutive calendar months from 2013 to measure employees’ hours, rather than the entire 2013 calendar year. This “transitional measurement period” must meet the following conditions:
- Be shorter than 12 months, but no less than six months long
- Begin no later than July 1, 2013
- End no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014.
An employee’s status during the transitional measurement period will determine how that employee is treated (i.e. as full- or as part- time) during the associated stability period in 2014 for purposes of the penalties.
Employers who intend to adopt this safe harbor and who wish to take advantage of the transitional relief need to implement procedures to track employee work hours no later than July 1, 2013, if such data collection is not already in place.