Employers should review their offers of coverage to ensure full-time employees are being offered the opportunity to enroll in health benefits. It is important to note that employers using the look-back measurement method for determining full-time status have to make offers of coverage to variable hour employees who measure full-time during the measurement period. Offering Open Enrollment to only employees who are in a benefits-eligible class may cause the employer to violate the Affordable Care Act.
ACA requires applicable large employers (those with 50 or more full-time/full-time equivalent employees) to offer their full-time employees health coverage or pay a tax penalty. An employer can determine an employee’s full-time status on a monthly basis or an employer can use a look-back period to set full-time status for a future period, generally the plan year.
Under the look-back measurement method, an employer tracks the employee’s hours of service during a specific measurement period. The employer uses the hours calculated during the measurement period and determines an average hours per month over that period. The results of this calculation will determine an employee’s full-time or not-full-time status during a future period, called the “stability period.” Most employers run their stability period consistent with their plan year.
Employers using the monthly measurement period for ACA hours should review results on a monthly basis. Employers using the look-back measurement method should (a) make sure all hours are accumulated for employees on an ongoing basis and (b) offer coverage to individuals who calculate to be “full-time” as a result of the look-back calculations.
If coverage is not offered to employees who calculate to be full-time, the employer runs the risk of not offering coverage to 95% of its full-time employee workforce. When this happens, if an employee gets a tax credit to purchase coverage through the Marketplace, an employer may be subject to large penalties. Figuring this out upon transmitting Form 1094 to the IRS is too late; an employer must make sure it is offering coverage to full-time employees during the year. Reviewing measurement results will enable an employer to properly offer coverage for the and avoid future tax penalties.
For assistance with ACA compliance or to discuss collecting hours for determining full-time status, contact ACA-Services@BASusa.com.