Source: http://www.healthcare-attorneys.com/counting-hours-and-days-under-the-aca/
Timestamp: 2018-10-20 14:29:11
Document Index: 113506364

Matched Legal Cases: ['§4980', '§4980', '§4980', '§4980', '§4980', '§4980', '§4980']

Counting Hours and Days Under the ACA | Healthcare Attorneys
A seasonal employee is not defined in the proposed regulations. Instead, employers will be permitted to use a reasonable, good faith interpretation of the term seasonal employee through at least 2014. If you believe your company has a seasonal employee issue, please contact us to discuss various planning issues.
The §4980H penalties are applied on a monthly basis. If an employer has employees who average more than 30 hours of service a week some months but not others, these employees would have to go in and out of the employer’s health plan on a monthly basis to comply with §4980H. The IRS and Treasury recognized this problem and tried to make things simpler for employers by creating a safe harbor. The safe harbor allows employers to look back at an employee’s hours of service to determine the employee’s status and use that status for a certain period of time going forward regardless of the hours of service the employee works subsequent to the employer counting the employee’s hours of service. This will prevent employees from going in and out of an employer’s health plan on a monthly basis. If an employer uses the safe harbor, the employer will be able to adjust the beginning and end of its Measurement Periods (discussed below) to match payroll periods that are one week, two weeks, or semi-monthly in duration.
An employer that does not elect to use the safe harbor would be required to total each employee’s hours of service on a monthly basis. This would be a huge challenge as an employer would have to accurately count the hours of service for each employee each month regardless of when the payroll period fell. This could be an issue for employers using a payroll system that operates every week or two weeks as these payroll periods will frequently overlap into two months. Additionally, as mentioned above, an employee may have to move in and out of an employer’s plan as frequently as monthly to comply with §4980H. The following describes the safe harbor that has been created to assist employers.
The safe harbor incorporates three periods to simplify the process for employers when tracking an ongoing employee’s hours of service. An ongoing employee is an employee who has been employed for at least one Standard Measurement Period. The Standard Measurement Period is a time period chosen by the employer of at least three, but not more than 12 consecutive months. It makes sense to tie the Standard Measurement Period to the start of a payroll period which is allowed under the proposed regulations. The employer will look back at each ongoing employee’s total hours of service during the Standard Measurement Period to determine whether the employee averaged at least 30 hours of service per week to be classified as full-time.
While the employer has a choice when selecting the length of the Standard Measurement Period, there are only two logical options for employers. The most logical choice for an employer is to select a Standard Measurement Period of 12 months. This option requires the least amount of administrative work and provides employees with certainty on whether the employee will be covered by the employer’s plan in yearly increments. It is possible an employer has a six month period that requires its workforce to put in a lot of hours and a six month period that requires fewer hours. An employer with many seasonal employees comes to mind for this scenario. In this case a six month Standard Measurement Period may make sense for reducing the employer’s cost of providing coverage or paying a fine under §4980H. However, for the overwhelming majority of employers the 12 month Standard Measurement Period will be the best option. The rest of the paper will assume the employer selects a 12 month Standard Measurement Period for its ongoing employees. If you believe your company would benefit from using a six month Standard Measurement Period, please contact us to discuss the nuances it presents.
Once again, the employer will have a choice on the length of the Initial Measurement Period. However, the most logical choice will be an 11 month Initial Measurement Period. This will allow an employer flexibility and cushion time to make sure an employee that is classified as full-time during the Initial Measurement Period has the opportunity to enroll in coverage in order to comply with §4980H and the 90-day waiting period limitation. An employer could use a 12 month Initial Measurement Period and still comply with the law. However, a 12 month Initial Measurement Period will lead to situations when the employer will have only a few days to make coverage available to an employee who is determined to be full-time. If your company is using a Standard Measurement Period of six months, the length of your company’s Initial Measurement Period will need to be adjusted accordingly. Please contact Health Care Attorneys P.C. if your company plans on using a Standard Measurement Period of six months to discuss more details.
The safe harbor makes it easier for employers to comply with §4980H. However, the myriad rules associated with the safe harbor are anything but simple. Employers must have a system in place that accurately tracks its employees’ hours of service and accurately classify them according to the §4980H rules. Please contact Health Care Attorneys P.C. if you would like to learn more.