When do benefits kick in for workers
under healthcare reform?
The future of Obamacare no longer hangs in the balance. With
the president’s reelection and Democrats retaining
control of the Senate, the major parameters of the law will be
The reforms scheduled to take effect in 2014 contain some
positive regulatory developments concerning the employer
mandate. You and your clients should take immediate note.
To refresh your recollection, beginning Jan. 1, 2014, the
Affordable Care Act requires that all “large”
employers offer “affordable coverage” to their
“full-time employees” or pay a tax penalty of
$2,000 to $3,000 per employee. A “full-time
employee” is defined under the legislation as any
employee who works more than 30 hours a week.
Determining the application of the mandate requirements is
anything but straightforward. For example, a
“large” employer is any employer who employs more
than 50 full-time workers or full-time employee equivalents.
There is a statutorily prescribed formula for converting
part-time employee hours into “full-time
“Seasonal workers” (defined as workers who work
fewer than 120 days per year and who fall within
yet-to-be-prescribed permissible “seasonal worker”
job classifications) are exempt from this calculation. But if
you are a “large” employer subject to the mandate
requirements, nothing in the statute exempts seasonal workers
from the mandate’s coverage and penalty regime.
In an early set of implementing regulations, the Internal
Revenue Service, which is charged with enforcing the mandate,
dictated that the full-time employee assessment would be made
retroactively on a month-by-month basis. A prorated portion of
the annual penalty would have to be paid for any employee who
worked “full-time” in any calendar month who did
not receive an offer of affordable coverage.
For companies that maintain large part-time workforces, the
retrospective nature of this assessment would have required
very careful management to ensure the penalties could be
avoided. Seasonal workers faced an even more daunting prospect
because it was likely that employers would have been confronted
with the mandate requirements for the parts of the year when
they employed seasonal workers.
This fall the IRS finalized a safe harbor option that should
greatly alleviate compliance issues, at least for now. The IRS
notes in its guidance that employers can rely on it at least
through 2014, which suggests the agency is reserving the right
to later change the rules.
In essence, the guidance allows an employer to look back
over a three- to twelve-month “measurement period.”
Any employee who worked fewer than 30 hours per week, on
average, over the course of that period would be classified as
part-time. The worker would not be subject to the
mandate’s requirements for a “stability
period” for at least six months.
The rules require employers to apply periods uniformly but
permit different periods to apply to:
- Collectively bargained employees and non-collectively
- Salaried employees and hourly employees
- Employees of different entities and
- Employees of one employer located in different
Although the lexicon is a bit opaque, the rule should help
because it addresses two primary problems with the initial
First, there will be no penalties for increased deployment
of a part-time employee on a sporadic basis under the safe
harbor. The safe harbor permits an employer to treat an
employee that was, on average, part-time during the measurement
period, as part-time during the entire stability period. This
is regardless of how much the individual actually worked during
the stability period (provided there has not been a job change
into a full-time position).
Second, the safe harbor should go a long way toward
alleviating seasonal worker mandate compliance issues because
it will allow the seasonal worker’s hours to be averaged
over the entire measurement period. This includes portions of
the period when the seasonal worker may not be employed at