One of the most important responsibilities during open enrollment is making sure that all employees who must be offered health coverage under the Affordable Care Act (ACA) are identified correctly. If a full-time employee is not offered coverage, the employer could face significant IRS penalties under the Employer Shared Responsibility provisions. Getting this determination right is not just a matter of policy, it is a matter of compliance and financial risk management.
ACA Definition of Full-Time
For ACA purposes, a full-time employee is someone who:
- Works an average of 30 hours per week, or
- Averages 130 hours of service per month.
This definition may differ from your company’s internal classification of full-time (such as 35 or 40 hours per week), so it is essential to apply the ACA standard when determining eligibility for health coverage.
Methods to Determine Full-Time Status
Employers can use one of two approaches:
- Monthly Measurement Method
- Employees are considered full-time for any month in which they work at least 130 hours.
- This method provides a month-by-month determination but can be difficult to manage for employees with fluctuating schedules.
- Look-Back Measurement Method
- Employers track employee hours over a defined measurement period (3–12 months).
- If the employee averages 30 or more hours per week during that period, they must be treated as full-time during the following stability period (6–12 months).
- This method is especially useful for variable-hour, seasonal, or part-time employees whose schedules change throughout the year.
Why This Matters for Open Enrollment
- Eligibility: All employees who meet the ACA definition of full-time must be offered minimum essential coverage.
- Compliance: Failing to offer coverage to eligible full-time employees can trigger Employer Shared Responsibility penalties.
- Communication: Employees who newly qualify as full-time must be notified and given the opportunity to elect coverage during open enrollment.
HR Action Steps Before Enrollment
- Review employee hours to confirm who qualifies as full-time under ACA rules.
- Identify variable-hour and seasonal employees who measured into full-time status.
- Coordinate with payroll and benefits vendors to ensure hours data is accurate.
- Communicate eligibility clearly to employees, especially those newly qualifying.
- Document your process, including measurement and stability periods, to demonstrate compliance if audited.
By applying the ACA’s full-time definition and offering coverage to all eligible employees, HR can protect both employees and the organization. Careful attention now helps ensure compliance, prevents penalties, and gives employees confidence during open enrollment.
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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.
