By Danielle Capilla
Chief Compliance Officer at United Benefit Advisors
The Patient Protection and Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer full-time employees health coverage, or pay one of two employer shared responsibility penalties. An ALE is an employer with 50 or more full-time or full-time equivalent employees (for 2015, this threshold is 100). A full-time employee is an employee who works 30 hours or more a week.
Leaves of absence can make it difficult for an employer to determine if or how an employee counts toward the ALE threshold of 100, as well as determining if an employee is considered full time and must be offered coverage.
Under the ACA, any hour for which an employee is paid or entitled to payment must be counted as an hour of service. This includes:
- An hour worked
- Sick time
- Incapacity (including disability)
- Military duty
- Paid leave
Exceptions to the rule exist for:
- Hours worked by a student as part of the Federal Work-Study Program (or a similar state or local program)
- Hours which are considered income from sources outside the United States
- Hours performed as a “bona fide volunteer”
For hourly employees, an employer must count actual hours worked or paid.
For employees who are not paid hourly, an employer must use any of these three methods:
- Counting actual hours worked or for which vacation, holiday, etc. are paid
- Crediting an employee with eight hours’ work for each day for which the person was paid for at least one hour of work, vacation, holiday, etc.
- Crediting an employee with 40 hours’ work for each week for which the person was paid for at least one hour of work, vacation, holiday, etc.
- An employer using a crediting system must be careful not to underestimate an employee’s hours. For instance, an employer may not use the eight hour method for an employee who works 10 hours a day, three days a week.
As a general rule, if an employee terminates employment or is terminated from employment (not a layoff) and is rehired within 13 weeks (26 weeks for individuals working for an educational institution), or has unpaid non-FMLA (Family and Medical Leave Act) leave and returns to work within 13 weeks, the employee’s status as either full-time or non-full time must be reinstated, and he or she cannot be treated as a new hire, subject to a waiting period. Coverage must resume by the first of the month on or following the date the employee returns to work.
Request UBA’s ACA Advisor, “Perfect Attendance! How to Handle Leaves of Absence under the ACA” for comprehensive help with:
- Methods for counting hours to determine full-time status (including educational institutions)
- FMLA, USERRA, and jury duty
- Unpaid leave
- Conveying policies
- Determining ALE status
- Crediting hours to employees