We are going to define several terms that are key to understanding who is counted as a Full-Time employee. Understanding this series of measurements is crucial and can make all the difference in your qualification status under the act.
- Full-Time Employee: A full-time employee is someone who works an average of 30 or more hours per week; however the IRS is going to consider 130 hours per month an equivalent to 30 hours per week.
- Part-Time Equivalent Employees: Part time employee hours are added together and divided by 120 per month to determine full time equivalent status. It is important to understand that you do not pay fines for part-time employees. They are only used to determine if you qualify as a large employer.
- Hours of Service: Each hour for which the employee is paid or entitled to payment for the performance of duties. For salaried employees, actual hours may be counted in the same manner as hourly employees, or by using the 8/40 per week equivalency. An anti-abuse rule prevents employers from using equivalency that would involve understatement of employee hours.
Variable Hour Employees
With these guidelines firmly in place, you then must consider how to qualify Ongoing, Seasonal and Variable Hour Employees. The IRS created an optional Safe Harbor under this section for that very purpose.
To determine if an employee is a Variable Hour Employee, the employer will look back across the standard measurement period to determine the status as a Variable Hour Employee for the stability period. The standard measurement must be 3 – 12 consecutive months. Employees who averaged 30 hours per week during the standard measurement period are treated as a full-time employee for the prospective stability period. This is regardless of the number of hours of service during the current stability period, as long as the employee remains employed. If an employee does not average 30 hours per week, the employee status as NON Full-Time will start and a new measurement period begins.
I understand that the topic of a Variable Hour Employee is a bit confusing. I have gone into much more detail on this topic in a separate blog.
Are you a Large Employer?
To determine if you are an Applicable Large Employer, subject to the Health Insurance Mandate, you will need to determine if you are a Small Employer or Large Employer as classified by the IRS. Please use the following worksheet as a guide.
_____ Number of Full-Time employees (averaging 130 hours/month)
_____ Number of Part Time hours worked divided by 120 = # of Full-Time Equivalent Employees
_____ Total number of Variable Hour Employees that are classified as Full Time
_____ Total number from all 3 categories
If this number is less than 50, you are not subject to penalties for not offering Affordable Health Insurance. If this number is greater than 50 you are a Large Employer under Obama Care and could be subject to penalties for not offering Affordable Health Insurance.
Offering Affordable Health Coverage can have adverse effects on employees who could qualify for Health Insurance Subsidies provided by the government. We have strategies to help your Business and each of your Employees receive the best and lowest cost options possible.
Here are some other blog posts that will help you with this complicated set of Health Insurance Rules