With tax season just barely over, it might be odd to be talking so soon about next year’s tax season, but for self-insured employers with 50 or more full-time employees facing potential tax penalties, we must. That’s because to avoid the tax penalties in 2016, the Affordable Care Act (ACA) will require these employers to show that the company provided health insurance this year to at least 95 percent of their full-time employees and dependents up to age 26.
If this applies to you, read on to learn what defines employee work status and some things you need to know to determine how many of your employees will be full-time status this year.
Two Methods to Determine Full-Time Status
According to the U.S. Treasury Department, full-time employees are identified as those who work at least 30 hours a week or 130 hours in a calendar month. The final regulations provide two methods to measure an employee’s work status.The first option is to count the number of hours worked per week or month.
The second option is to look back or forward in the calendar year to find a period of time to base the employee’s hours on. For example, if you look back to count an employee’s hours, it is called a measurement period. Conversely, if you look forward to count their future hours, it is referred to as a stability period.
Full-time Status for Various Employee Categories
Part-time employees are easy to identify since they work less than 30 hours a week but what about “variable” or “seasonal” employees? The final regulations state that volunteers for a government or tax-exempt entity such as emergency responders or volunteer firefighters will not be considered full-time employees regardless of hours worked.
Teachers and other educational employees will be considered full-time status even if they are off or work in a limited capacity during summer break. However, students who perform service under work-study programs are not considered full-time employees even if they work more than 30 hours a week.
Seasonal employees whose annual employment is less than six months will not be considered full-time employees regardless of how many hours they worked during the week while employed with the company.
Additional ACA Provisions for 2015
- If you are planning or in the process of providing dependent coverage for your 2016 plan year, you will not be penalized for not providing coverage to dependents in 2015.
- If your plan year didn’t start on January 1, 2015 but later in the year, you will be able to begin your compliance when your plan started.
- If you are newly eligible for the ACA requirement in 2015, the final regulations state that you can reference a period of at least six consecutive months instead of a full year to show your compliance.
We will be providing guidance over the next few months to get you ready for the various reporting requirements that will be mandated by next year’s filing. If you have any questions or want to find out how PCMI can help you with ACA compliance, contact your dedicated Account Manager today!