We’ve already talked a bit lately about the employer shared responsibilities that are now required thanks to the new Affordable Care Act provisions. Because of new rules like the Play or Pay Mandate, certain employers have to provide health insurance coverage to at least 95% of their full-time employees or make an employer shared responsibility payment.
Since it’s important to follow these rules and regulations to a tee, you’ll want to make sure that you and the IRS are on the same page concerning your employees who are eligible to receive health insurance offers.
For starters, the IRS considers 30+ hours a week (or 130+ hours in a month) to be full-time. If you were only going to look at your 40+ hour a week, you’d already be off on the wrong foot.
The IRS also expects you to include hours for which the employee is entitled to payment but no job duties are performed – in addition to the normal service hours they put in for the business – in their total hours to determine full-time status. These include hours like:
- – Paid Family and Medical Leave of Absence (FMLA)
- – Vacation days
- – Sick days
- – Military leave
- – Days off for jury duty
And just as there are hours the IRS thinks you should include (see above), there are hours the IRS does not consider hours of service. So time spent volunteering, in a work study program (like an internship), or earning foreign-sourced income doesn’t need to be included in your total tally.
So now that you know all of the hours to consider, there are three ways to determine an employee’s eligibility for an offer of health insurance coverage:
- 1. You can total up the actual hours of service each month for each employee (which may get a little difficult with the salaried employees).
- 2. You can total up the number of days each month each employee did at least eight (8) hours of work.
- 3. You can total up the number of weeks each month the employee did 30 hours of work.
And, of course, there are some conditions with whichever method you choose:
- – Pick a method and stick to it for the entire year. You’re not allowed to switch it up and change methods until next year’s reporting.
- – Methods 2 and 3 can be used to classify your salaried employees, you’ll just need to keep the classifications consistent.
- – You cannot use Methods 2 or 3 if their results understate the employee’s hours and bring them below the full-time employee hour minimum.
Stay tuned with ACAwise, an ACA reporting software for more ACA wisdom and know-how. And be sure to sign up for a free demo or account so when it’s time to report the coverage you offered to your full-time employees, you’ll be ready to easily and securely e-file Forms 1094 and 1095 to the IRS!