Thursday, August 21, 2014

PPACA Employer Compliance: Changes in Employment Status under the Look-Back Measurement Method

By far, the most difficult task employers will have in 2015 with respect to Healthcare Reform will be employee hour tracking.  The below is a great summary of some of different situations you'll be sure to face. 

This is from Michael Arnold writing at Mintz Levin
... Full-time employees 
A newly-hired employee that is not a new variable hour employee, a new seasonal employee or a new part-time employee—i.e., a full-time employee—must be offered coverage beginning no later than the first day of the fourth full calendar month of employment, provided, of course, that the employee is still employed on that day. ... 
Thereafter, the employer determines an employee’s status as a “full-time employee” based on the employee’s hours of service for each calendar month from date-of-hire until such time as the employee becomes an ongoing employee. 
New variable hour, seasonal, and part-time employees 
In the case of a new variable hour, new seasonal, or new part-time employee who experiences a “change in employment status” during his or her initial measurement period such that, if the employee had begun employment in the new position or status, the employee would have reasonably been expected to be full-time, an employer is not be subject to an assessable payment for that employee until (i) the first day of the fourth full calendar month following the change in employment status, or (ii) if earlier and the employee is a full-time employee based on the initial measurement period, the first day of the first month following the end of the initial measurement period (including any administrative period). 
As in the case of offers of coverage to full-time employees, the nature of the offer of coverage makes a difference. Where the employer’s offer of coverage fails to provide minimum value, the employer is not subject to an assessable payment under Code § 4980H(a) with respect to the employee, but the employer remains subject to the assessable payment under Code § 4980H(b). If the offer of coverage provides minimum value, the employer also will not be subject to an assessable payment under section 4980H(b). 
  • NOTE: The relief from penalties under Code §§ 4980H(a) and (b) in the case of changes in employment status mirrors the general rule governing offers of coverage during a stability period, under which the employer will not be subject to an assessable payment as follows: 
    • (i) Code § 4980H(a). The employer will not be subject to an assessable payment under Code § 4980H(a) during the initial measurement period (and any associated administrative period) if the employee who qualifies is offered coverage no later than the first day of the associated stability period (provided the employee is then still employed). 
    • (ii) Code § 4980H(b). If the offer of coverage provides minimum value, the employer also will not be subject to an assessable payment under Code § 4980H(b). 
Ongoing employees 
If an ongoing employee experiences a change in employment status before the end of a stability period, the change will not affect the application of the classification of the employee as a full-time employee (or not a full-time employee) for the remaining portion of the stability period. As a result, if an ongoing employee fails to qualify for an offer of coverage during a stability period because the employee’s hours of service during the prior measurement period were insufficient for full-time-employee treatment, and the employee experiences a change in employment status that involves an increased level of hours of service, the treatment of the employee as a non-full-time employee during the remainder of the stability period is unaffected. 
Examples 
(1) Part-time employee gets promoted into a full-time position 
A new part-time employee who transfers to a full-time position during his or her initial measurement period is treated as full-time under the rule described above. The employer will not be subject to an assessable payment for the period before the first day of the fourth full calendar month following the change in employment status, or if earlier (and the employee averages 30 or more hours of service per week during the initial measurement period) the first day of the first month following the end of the initial measurement period including any administrative period. If the change occurs when the (previously, new) part-time employee is an ongoing employee, however, then no offer is required until the end of the stability period. 
  • NOTE: The rules barring “waiting periods” in excess of 90 days under the Public Health Service Act must also be satisfied. Fortunately, final regulations implementing the waiting period rules generally facilitate simultaneous compliance with both standards. 
(2) Part-time employee terminates employment and is subsequently rehired within 13 weeks (or within 26 weeks in the case of an educational organization) 
The final regulations include “break-in-service” rules, under which an employee who resumes providing services to an employer “after a period during which the employee was not credited with any hours of service” may be treated as having terminated employment and having been rehired. Such an employee is treated as a new employee upon the resumption of services, only if the employee did not have an hour of service for a period of at least 13 consecutive weeks (or 26 consecutive weeks in the case of an educational organization). In addition, the final regulations include a “parity rule,” under which an employee may be treated as rehired after—
  • [A] shorter period of at least four consecutive weeks during which no hours of service were credited if that period exceeded the number of weeks of that employee’s period of employment with the applicable large employer immediately preceding the period during which the employee was not credited with any hours of service.” 
For example, if an employee started employment and worked for six weeks, then had a period of eight weeks during which no hours of service were credited, the employer could treat the employee as a rehired employee. 
Where the employee has not experienced a break-in-service, he or she is a “continuing employee.” As such, his or her status vis-√†-vis the application of the look-back measurement method does not change. The analysis set out in item (1) above applies here as well. 
(3) Full-time employee transfers to a “variable hour” position, whether or not after a break in service of less than 13 weeks (26 weeks in the case of an educational organization)
The transfer to a position that would qualify as variable hour if occupied by a newly hired employee makes no difference where an employee was originally determined to be, and is hired as, a full-time employee by an employer using the look-back measurement method. This employee will be full-time from date-of-hire until he or she becomes an ongoing employee. Accordingly, his or her treatment is determined month-by-month.