How many of you have heard the old joke “How do you eat an elephant?” The answer is “one bite at a time.” Well the Affordable Care Act is an elephant. With nearly a 1000 pages of regulations, which have spawned many more thousands of pages of additional regualtions and explanations, it is very difficult to understand. So I am going to give you a bite today to help explain one term I did not initially know.
One of the key provisions of the ACA is that it only applies to employers who have 50 or more full-time or full-time equivalent (FTE) employees. A second provision is that employers only have to offer insurance to their full-time employees. So one of the big tasks in this law is determining who is full-time and who is not. Under the ACA full-time is defined as anyone who works 30 or more hours per week. That is easy enough you may think, but what if you are a company that uses a lot of workers who have variable schedules.
Variable Hour Employee
According to the IRS “An employee is a variable hour employee if, based on the facts and circumstances at the date the employee begins providing services to the employer (the start date), it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week.” That is what works for 2014 and beyond. What about in 2013? You are allowed a “look-back” period of up to 12 months. This look back period has to be at least 3 months in length and no more than 12 months in length. That means it can be 6 or 9 or 7 or whatever. This is the period that helps you determine if the person averaged over 30 hours per week. If they did then they are to be considered a full-time employee. If they did not then they are not a full-time employee and hence get no insurance coverage. This analysis is called the measurement period and must be done annually.
After you have determined whether the employee is full-time or not they then enter the “stability period.” The stability period has to be of equal length to the measurement period. During this time their status does not change, even if the number of hours they work changes. For example, you have a worker who you determine works an average of 30 or more hours per week and you did so using a six month measurement period. Starting on January 1, 2014 they will be covered for insurance for at least the stability period. So that is what a stability period means, the status of an employee, once established cannot change during that period.
FAQ: Measurement and Stability Periods for New Hires and Rehires as Required by the Federal Patient Protection and Affordable Care Act from the Washington Restaurant Association. An excellent FAQ from an industry that knows variable workers.
Publication 12-58 from the IRS
PPACA Guidance on Full-Time Employees, 90-Day Waiting Period Limit written by By Illyse Schuman, Littler Mendelson for the SHRM National website
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