ACA Full-Time Status Even When Work Hours Reduced

Posted by BAS - 19 March, 2020


Employers are facing difficult decisions as COVID-19 impacts business operations. Some employers are considering the possibility of office closings, workforce reductions, temporary layoffs or furloughs. Employers may also be considering reducing the work hours of employees. When decisions are being made, employers must remember to take into account health coverage requirements under the Affordable Care Act (ACA).

The ACA requires applicable large employers to offer minimum essential coverage providing minimum value to full-time employees and their dependents. A full-time employee is an employee who works 30 or more hours per week (130 hours per month).

An employer that uses the lookback method for determining employees’ full-time status should be mindful of obligations to continue offering health coverage even upon a reduction of hours. Under the lookback method, an employer counts the employee’s hours of service in one period (the measurement period) to determine the employee’s full-time status for a future period (the stability period). Once full-time status is determined, it is locked in for the entire stability period, even if the employee’s hours fluctuate during that stability period.

Employers may be reducing work hours during the COVID-19 pandemic. The actual number of hours worked at this time cannot impact an employee’s status as a full-time employee for the existing stability period. The actual hours worked now will be counted as part of the ACA measurement period for the future stability period, but they should not change the employee’s designation of full-time, presently. That means an employer cannot simply stop offering health coverage if the employee’s work schedule is reduced due to business decisions being made in response to COVID-19.

Before cancelling health coverage for any employee whose hours are reduced in response to COVID-19 business planning, employers should consult their legal counsel. See our HR and Benefits Compliance article ‘Don’t Forget COBRA Requirements for COVID-19 Layoffs’ for offering continuation coverage in response to a loss of health coverage.

Topics: Health Care Reform (ACA), Covid

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