As employers prepare for open enrollment, one of the most important compliance tasks is determining which employees qualify as full-time under the Affordable Care Act (ACA). This process is essential for employers subject to the ACA’s Employer Shared Responsibility provisions and directly affects who must be offered health coverage for the upcoming plan year.
Why It Matters
Under the ACA, applicable large employers (ALEs)—those with 50 or more full-time and full-time-equivalent employees—must offer affordable, minimum essential coverage (MEC) that provides minimum value (MV) to all full-time employees and their dependents.
Failing to offer compliant coverage to eligible employees can result in substantial IRS penalties under sections 4980H(a) and 4980H(b) of the Internal Revenue Code.
Defining Full-Time Status
The ACA defines a full-time employee as one who averages 30 or more hours of service per week or 130 hours per month. Employers must use one of two approved methods to identify which employees meet that threshold:
- Monthly Measurement Method – Determines full-time status based on hours worked each calendar month.
Best for organizations with stable, predictable schedules. - Look-Back Measurement Method – Measures hours over a defined “measurement period” (usually 3–12 months) to determine eligibility for a future “stability period,” during which the employee is treated as full-time (or not) regardless of hours worked.
Commonly used for variable-hour, seasonal, or part-time workforces.
Timing Is Key
Accurate determination of full-time status must occur before open enrollment to ensure that all eligible employees receive timely offers of coverage. Employers using the look-back method should complete their measurement period and begin the administrative period (typically 30–90 days) early enough to prepare offers for the new plan year.
This is especially important for:
- Variable-hour or seasonal employees whose status may change.
- Rehires and employees returning from leave, who may need special review.
- New acquisitions or business units that have not previously been included in ACA reporting.
Consequences of Inaccurate Tracking
If an ALE fails to offer compliant coverage to at least 95% of its full-time employees and their dependents, the employer may face the 4980H(a) “no-offer” penalty. Even when coverage is offered, if it is not affordable or lacks minimum value, the employer could incur the 4980H(b) penalty for each full-time employee who receives a Marketplace subsidy.
Both penalties can quickly add up and are assessed on a monthly basis.
Best Practices for HR and Benefits Teams
- Review workforce classifications to confirm who is considered full-time, variable-hour, or part-time.
- Audit time and payroll data to ensure hours of service are accurately captured.
- Confirm affordability calculations under one of the IRS safe harbors (W-2, rate-of-pay, or federal poverty line).
- Coordinate with vendors that assist with ACA measurement and reporting to verify that all measurement periods, look-back rules, and stability periods align with your plan year. If you use BAS for your ACA data collection and compliance, make sure all data is entered into MyEnroll360 so full-time calculations are correct.
- Document every step. Maintain clear records of how eligibility is determined and communicated in case of IRS inquiry.
Final Thoughts
Determining who qualifies as full-time under ACA rules is not just an administrative task, it is a compliance requirement that protects your organization from penalties and ensures access to coverage. Completing this analysis before open enrollment gives HR teams time to make informed offers, communicate eligibility clearly, and maintain compliance throughout the upcoming plan year.
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.
