What is a full time employee under ACA rules?


What are the employer shared responsibility provisions of the Affordable Care Act also known as, "pay or play"? It requires applicable large employers ("ALEs")—typically those with at least 50 full-time employees or 50 full-time equivalent employees (FTEs) to offer both affordable & minimum coverage health insurance to full-time employees (and offered to dependents) or the ALE will be subject to pay a penalty tax if any full-time employee becomes certified to receive a premium subsidy for purchasing coverage in the Health Insurance Marketplace.


Calculating a FTE(s)

An employee is a full-time employee for a calendar month if he/she averages at least 30 hours of service per week. additionally, 130 hours of service in a given calendar month is also treated as the monthly equivalent of at least 30 hours of service per week.

What does an actual hour of service mean?

  • Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer or which duties are NOT performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.

Recently, the IRS addressed a question from an employee whose employer enforced a new policy restricting part-time or seasonal employees from working more than 29 hours of service in any week. The IRS affirmed the prior guidance and advised if an employee who works an average of 30 or more hours of service per week during any given month could potentially trigger the employer's liability under pay or play for that given month. Interestingly enough, the IRS also stated this penalty would only be triggered if the employee sought and gained a subsidy through the marketplace exchange. Read more about it here.

 


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The information provided here does not constitute, nor serve as a substitute for legal advice. Please consult legal counsel to ensure all facts and circumstances are taken into account in complying with applicable state and federal law.