As a provider of software solutions for the staffing industry, we have been following developments of the Affordable Care Act since it was passed. One of the key components of the law is how to define a full-time employee for purposes of determining whether an affordable healthcare plan must be offered to the employee or penalties paid. On 2/9/2012, the Department of Labor released a document/FAQ describing the multi-factor test that they as well as the Internal Revenue Service and the Department of the Treasury are considering in determining who is full-time. There are two separate components to this this test depending on whether the individual is currently employed or whether the individual is a newly hired employee.
For current employees as of January 1, 2014, employers can choose a look-back period of up to 12 months to determine if an employee worked full time (currently defined as 130 hours per month). If an employee is deemed full time under this definition, you must either offer an affordable (more on the definition of affordable in a later post) insurance plan OR pay penalties as outlined in BWSI’s previous post here. Once an employee is deemed to be full time, this would carry over for the following 12 month stability period as long as they remain employed. It is still to be determined if there will be any minimum number of hours that must be worked monthly to maintain the full time status during the 12 month stability period and many business advocacy organizations are pressing for this to be the case. The American Staffing Association is arguing that there should be at least a 35 hour per month minimum that must be worked during the stability period to maintain the full time status of the employee. Of course, given the nature of staffing and many employees going from assignment to assignment, there is no clear cut definition in the law of what “employed” means.
The definition of full time for newly hired employees is somewhat more opaque in my opinion. If, at the time of hire, an employer can “reasonably determine” that the employee will work full time on an annual basis AND the employee works full time in the first three months of employment, you must offer an affordable plan or pay penalties at the end of the three month period. Now for the fun part….If you can’t reasonably determine that a newly hired employee will work full time, then if the employee works full time in the first three months and you “reasonably believe” those hours are representative, you must offer an affordable plan or pay penalties. If the hours in the first three months (say in a seasonal retail position for example) are unrepresentative, then you get three more months to determine the employee’s full time status. So, what if after six months that an employee is working full time you don’t consider the hours representative? Currently, there is no guidance on this point and further clarification is needed (the list of points that need clarification sometimes seem to be even longer than the law itself!)
With either current or newly hired full time employees, the law allows for a maximum waiting period of 90 days before you have to offer an affordable plan; however, you can set eligibility rules that exclude certain classes of employees based on job classifications (which, of course, must be “reasonable”). At such time, the employer will probably have 31 days after the applicable look-back period to offer/enroll the full time employee in an affordable plan (another one of those points needing final clarification).
If you are a staffing service reading this, you probably have a slew of questions such as ‘what if the employee is between assignments, when does the testing clock reset?’ or ‘what if an employee enrolls in a plan, but stops working full time?’. At this point, we don’t know and the details are still being hashed out with guidance to be forthcoming. To add even more variables to the equation, the U.S. Supreme Court ruling on the healthcare law could drastically affect how the law is implemented and what, if any provisions will be intact, struck down, or modified due to this ruling. In our next post, BWSI will cover an issue that will be near and dear to many of our clients—the non-discrimination rules on the plans you offer (e.g. the two-tier plans where your in-house employees are offered one plan and your contingent workforce offered a different plan).