The IRS final employer mandate rule implements the ACA’s command that each Applicable Large Employer (“ALE”) shall offer qualifying, affordable group health coverage to “its full-time employees (and their dependents)” or pay related taxes, if at least one of them buys a QHP through an Exchange with a federal subsidy.  An Applicable Large Employer is one who “employed an average of at least 50 full-time employees on business days during the preceding calendar year.”  For these and other reasons, ACA compliance planning requires the ability to identify one’s “full-time employees.”  It sounds simple, but it’s not.

Why you’re asking determines which set of rules to use.  If you’re trying to determine your employer size category – small, “bubble” ALE, or full ALE – you count your full time employees for each month in 2014 (or, if you choose, an alternate period of at least six consecutive months in 2014), then divide by the number of months that you examined. For each of those months, you count as full-time those with at least 130 “hours of service.”  You then add the hours of service of all other employees in the same month, and divide that sum by 120, to yield a full-time equivalent number, which you add back to the full-time employee count to produce your monthly full-time employee total.  For this purpose, counting “hours of service” probably will be your chief challenge.  The final rule provides useful guidance, but leaves some “hours of service” questions unanswered.  What’s key is that you understand that you are performing a 2014 calculation to determine your 2015 status.

Another set of rules applies (with some overlap) if you are trying to identify “full-time employees” who are due an offer of affordable, qualifying coverage (and if so, the deadline for that offer).  For these purposes, for many workers, you have two alternatives – the monthly method and the “look-back” method, if you decide that it’s worth the trouble.  If not, you may offer affordable, qualifying coverage to all employees, soon enough to enable them to enroll and have coverage in force by the 90th day of employment.  In fact, some insurers have set uniform policy terms effecting coverage on the first day of the month that begins 60 or more days after employment.  Of course, if your plan covers only “full-time employees,” you must identify them.  Here’s how.

“Monthly” measurement means exactly that.  Count each employee’s hours of service for each month.  If an employee works at least 130 service hours in a month, that employee is full-time and the employer must make an offer of coverage by the end of the employer’s group health plan waiting period, which cannot exceed three calendar months.  Or, count hours of service over successive weekly periods, some months having four counting weeks and some 5.  “Full-time” then will be 120 hours in months with four weekly periods and 150 hours in months with five.  A full-time month starts the running of the maximum waiting period.

“Look-back” measurement, alternatively allows an employer to avoid piecemeal triggering of individual waiting periods, but it may not be applied to new, full-time employees.  Their waiting period starts to run on the hire date.  You may use the look-back method to determine the full time status of new, variable hour and seasonal employees, and all ongoing employees.

First, choose a standard measurement period between 3 and 12 months.  When it is complete, look back and calculate each employee’s average hours of service during the measurement period.  Then, assign to each that group health plan eligibility status during a “stability” period of 6 months, or the length of the associated measurement period, if greater.  One look-back problem is that each new hire subject to it will have his or her own individual measurement period, at the conclusion of which, he or she must be rolled into the standard measurement/stability cycle for ongoing employees.  The time needed to analyze what has been measured may be taken during an “administrative” period not exceeding ninety days.  That administrative period must overlap the prior stability period so that ongoing employees do not lose eligibility based on the more recent measurement.

You just read a very condensed, simplified summary part of a complex rule, which explains these things with multiple examples. We omitted important details regarding, among other things, the maximum new hire waiting period (a relaxed version of the PHS Act § 2708 rule), how job changes affect full-time measurements in progress, how to treat breaks in service, and how to identify seasonal and variable hour new hires.  It’s no wonder that payroll processing and benefit administration services consider the ACA to be manna from marketing heaven.  Large employers need to decide soon: (1) whether to limit coverage to full-time employees; (2) if so, how to identify full-time employees; (3) whether to perform the required functions internally, or outsource them.