Monday, May 18, 2015

PPACA: Crediting Employees for Hours of Service When No Work is Performed and Keeping Employees on Your Health Plan When They No Longer Work

This is Part 2 of a Story We Posted on May 7, 2015.  You can read that story, entitled, "An Employee Moving from Full to Part-Time Status May Have to Stay on Your Health-Plan for More Than a Year Under PPACA" here.

By Craig Gottwals

Special thanks to Jennifer Moore and Michael Sanchez who assisted in the research for and editorial work on this column.   

In Brief:

  • In Part 1 we explained how an employee could move from full to part-time employment status and still remain on your benefits for as long as a year and a half under PPACA.
  • In this post we take a deeper look at: 
  1. which hours count as hours of "work" or "service" under PPACA; and 
  2. how you may have to keep an employee on your health insurance for up to a year when they are no longer working (as opposed to having gone part-time).  

The complexities that emerge as employers attempt to apply the rules of the Patient Protection and Affordable Care Act ("PPACA") multiply exponentially as real-life scenarios arise.  Employers and human resource practitioners now see what 2,400 pages of statute and 30,000-plus pages of regulations look like in practice.

In this post we'll look specifically at what an employer must count as an hour of service during an employee's measurement period to ascertain whether that employee is, in fact, a full-time employee.  Once full-time status is confirmed in any given situation, we'll turn our attention to the conditions of employment that would require that an employee remain covered under your health plans.

Hours of Service that Must Be Counted to Determine Full-Time Status in the Measurement Period

The federal regulation addressing the issue of which hours of service count in determining an employee's full-time employment status during that employee's measurement period under PPACA is 29 CFR 2530.200b-2 - Hour of service.  It states, in part:
(a) General rule. An hour of service which must, as a minimum, be counted for the purposes of determining a year of service, a year of participation for benefit accrual, a break in service and employment commencement date (or reemployment commencement date) ... is an hour of service as defined in paragraphs (a)(1), (2) and (3) of this section. The employer may round up hours at the end of a computation period or more frequently.
(1) An hour of service is each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer during the applicable computation period. 
(2) An hour of service is each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence, ... 
(ii) An hour for which an employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, or unemployment compensation or disability insurance laws; and 
(iii) Hours of service are not required to be credited for a payment which solely reimburses an employee for medical or medically related expenses incurred by the employee. 
For purposes of this paragraph (a)(2), a payment shall be deemed to be made by or due from an employer regardless of whether such payment is made by or due from the employer directly, or indirectly through, among others, a trust fund, or insurer, to which the employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.
With regard to unpaid leave under FMLA, USERRA, jury duty or perhaps an extension of FMLA leave as part of an ADA accommodation, the regulations have a special section entitled "Special rule for determining hours of service for reasons other than the performance of duties."  In those cases, employers are required to determine hours of service by either:
  1. Determining the average hours of service per week for the employee during the measurement period, excluding the special unpaid leave period, and using that average for the employee for the entire measurement period; or
  2. For an employee whose pay is not calculated on the basis of units of time, crediting the employee with hours of service for special unpaid leave at a rate equal to the average weekly rate at which the employee was credited during the other weeks in the measurement period.  
Hence, for purposes of counting hours of service, an employer must credit an employee's:
  1. Hours of work;
  2. Vacation;
  3. Sick hours (donated or their own);
  4. PTO;
  5. Unpaid leave; 
  6. Time out on Long Term Disability; 
  7. Timeout on Short Term Disability; and 
  8. Legally required unpaid leave such as FMLA, USERRA, Jury Duty, and perhaps an ADA Extension of FMLA (whether an ADA extension of FMLA as a reasonable accommodation would be counted as an hour of service in the measurement period is an open question). 
An employer need not credit service for leaves that are solely mandated by: 
  1. State workers compensation laws; or 
  2. State disability laws. 
However, if a leave is covered by both a state disability leave as well as a privately insured disability leave or some other creditable leave (such as FMLA), the employer would need to credit those hours.  In any case, if the employer is crediting hours of work for a period of time in which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, that employer need not credit any more than 501 hours for any such period.  

Employment Status in the Stability Period

Once an employee is in their stability period, the employer must keep them on the health insurance plan until that person is no longer an employee or until a subsequent measurement period reveals they are no longer a full-time employee under the rules of PPACA.

If the employee is not paying their portion of the premium, they can be cancelled for non-payment.  An employee can also be terminated for legitimate, non-discriminatory reasons.  However, if the person is re-hired inside of 13 weeks, they must be treated as though they have been continuously employed and were never terminated.

Furthermore, ERISA makes it illegal to terminate someone for the purpose cutting off a benefit that they have achieved a legal right to receive.  In part, Section 510 of ERISA provides:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.
This can keep a "former" employee on your health plan for up to a year (or more) in some cases.  Assume the employer uses a 12-month measurement period (approximately 95% of employers are) and that the employee in question worked 60 or even 70 hour work weeks before they went out on an FMLA leave.  You could then end up with a situation where FMLA expired and the employee stayed out on an extended leave:
  • due to a collectively bargained agreement; or 
  • a possible ADA extension of FMLA for a reasonable accommodation; or 
  • because there is a worker's compensation dispute and your employment counsel has advised you not to terminate the employee while out during that time. 
In that case, as long as the person is still "employed" (even if they receive no compensation from you) they must be offered medical insurance under your company health plan for the remainder of their stability period.  In fact, if they really did work 60-hour weeks for six months and then stopped working, cobbling together the job protected leaves listed above, they could stay on your plan for the remainder the present stability period and much of the next one.

  • X-Corp has a calendar year benefit plan and uses a 12-month measurement period for all employees. 
  • Jill has worked at X-Corp for many years as an hourly-paid clerk in their accounting department. 
  • During the first 6 months of 2015, Jill averaged 60 hours a week for a total of 1,440 hours in 2015. 
  • On July 1, 2015, Jill went out on an FMLA leave. 
  • X-Corp also has a collectively bargained agreement with employees that entitle them to an additional 6-month unpaid leave of absence after the expiration of FMLA. 
Under the above rules, Jill would be credited with 2,160 hours of service in 2015: 1,440 hours of work, plus 60 hours per week during FMLA, for an additional 720 hours. 2,160 hours of service in 2015 is clearly more than the 30 hours per week required to be considered full-time under PPACA (it's actually more like 41 hours per week).  So, when X-Corp conducts its testing during their administrative period at the end of 2015, they will see they must continue to offer Jill health insurance into 2016.

Jill will remain on the health plan as long as she continues to pay her portion of the premiums and until her 6-month union-mandated post-FMLA leave expires.  In this example, Jill will have company sponsored healthcare until approximately April 1, 2016 when her employment could be terminated according to the provision of the union agreement.  This is because Jill has 12 weeks for FMLA and then 6 months under the union agreement.  This is true even though Jill would not have worked a day since June 30, 2015.