For employers subject to health care reform, tracking hours worked is an ongoing process. An employer must offer affordable, minimum essential health coverage to its full-time employees and their dependents or pay a tax penalty. A full-time employee is someone who works 30 or more hours per week or 130 hours per month.
An hour of service for tracking purposes is each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and each hour for which an employee is paid, or entitled to payment, by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.
Employers must determine if their employees are full-time or not-full time to properly offer coverage and report to employees and the IRS. Employers have two different options for determining full-time status: (1) the monthly measurement method or (2) the look-back measurement method. Both methods require ongoing tracking of employee hours.
Under the monthly measurement method, if an employee has at least 130 hours of service in any calendar month, the employee is full-time for that month.
Under the look-back measurement method, an employer tracks the employee’s hours of service during a specific look-back measurement period, calculates the average hours per month over that period, and treats the employee as full-time or not full-time during a subsequent stability period.
No matter which measurement method is used, an employer must offer coverage to its full-time employees or face the imposition of penalties if an employee receives a tax penalty for purchasing health coverage on the Exchange. All employers subject to the Affordable Care Act must continually track employees’ hours of service on an ongoing, month-by-month basis, in order to make the proper identification of full-time status and benefits eligibility for their employees.
