Employer Shared Responsibility
A key element of the ACA is the employer “shared responsibility” provision. This provision, currently scheduled to take effect in 2014, would assess a penalty against certain “applicable large employers” (those with 50 or more full-time employees) that either fail to offer “minimum essential coverage” to their full-time employees, or that offer coverage that is “unaffordable” relative to an employee’s income. “Full-time” is defined to mean an employee who is employed an average of at least 30 hours per week.
Knowing which employees count as full-time is critical for employers in determining whether they are subject to the shared responsibility provision. In certain industries where employee hours fluctuate each week (such as retail and hospitality), employers have been struggling to understand how the new rules will apply to them.
The FAQs indicate that the Departments intend to issue guidance that would allow employers to use a “look-back/stability period safe harbor” for purposes of determining whether a current employee has averaged at least 30 hours of service per week during the measurement period. As described in an earlier IRS Notice, under this approach, an employer would be permitted to determine each employee’s full-time status for a defined prospective period (the stability period) by measuring that employees’ hours over a defined retrospective period (the look-back period). The Departments anticipate that future guidance will allow look-back periods and stability periods of up to 12 months.
The Departments also intend to issue guidance on how to handle newly-hired employees. The FAQs specifically propose a methodology for determining full-time status in situations where, based on the facts and circumstances, it cannot reasonably be determined whether a newly-hired employee is expected to work full-time.
