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ACA Variable Hours Tracking: Who, What, When?

Employer compliance is an ongoing effort that requires preparation and maintenance, and ACA hours tracking can be complicated. Especially for employers who have variable hour employees who require eligibility determination throughout the year. As a reminder, a variable hour employee is one who does not have a set schedule that meets the average of 30 hours per week. In other words, at the employee’s hire date the employer cannot determine whether the employee is reasonably expected to work on average at least 30 hours per week because their hours vary and are uncertain.

Since the ACA requires employers to offer health coverage to employees who average 30 or more hours per week OR 130 hours or more per month, it is important to be tracking eligibility for variable hour employees on an ongoing basis. All new variable hour employees (i.e. employees who have been employed for less than a year) will be tested in an Initial Measurement Period. A new variable hour employee must complete the entire Initial Measurement Period before eligibility can be determined. While ongoing variable hour employees (i.e. employees who have already completed at least 1 measurement period) are tested in a Standard Measurement Period.

The ACA allows employers to choose from two methods to determine if a variable hour employee should be classified as full-time under the ACA:

Monthly Measurement Method

  • If an employee works 130 hours in one month, they will be deemed as being full-time and be eligible for employer-sponsored health coverage – with coverage starting no later than the first day after two full months from the month the employee worked at least 130 hours.
  • Best suited for employers with mostly salaried workers.
  • This method is not supported by the Integrity Data ACA solution.

Look-back Measurement Method

  • Establishing a measurement period in which an employee’s hours of service are averaged in order to determine if that employee had, on average, 130 hours a month.
  • Employees meeting the full-time status during a measurement period should be provided access to health care coverage during the corresponding stability period regardless of their hours of service currently.
  • Best suited for employers who have mostly hourly workers with varying work hours.
  • This is the preferred method because it allows employers to establish a testing period during which eligibility is determined on average over the duration of the selected time period.

When utilizing the look-back measurement method, the employer has the flexibility to establish their own testing period (i.e. look-back period). So the employer will need to establish the following periods for both the Initial Measurement Period and Standard Measurement Period:

  • Measurement period: The period during which hours of service will be calculated and averaged. This period cannot be less than 3 months, and no longer than 12 months.
  • Administrative Period: This period provides employers time to review which employees have worked enough hours to meet full-time eligibility. Employers should also notify eligible employees of their eligibility during this time period and provide them with any necessary medical enrollment materials. This period cannot exceed 90 days.
  • Stability Period: This is the period of time that employers must offer health coverage to all employees who were determined to be full-time during the measurement period. Coverage must be offered to these employees for the entire duration of the chosen stability period, regardless of how many hours they work during the stability period. This period cannot be less than 6 months and cannot exceed 12 months.

One nuance to keep in mind when determining these time periods for the Initial Measurement Period – the Initial Measurement Period and Administrative Period cannot be greater than 13 months. This is not the case for the Standard Measurement Period.

Determining Full-time Eligibility

Once these time periods have been confirmed for the initial and standard measurement period, the full-time status assessment should begin. Employers should be sure to track all of the hours of service on a monthly basis. Hours of service does not just include paid hours that are clocked on the job. Also included are vacation, holiday, sick leave, leave of absence, incapacity and layoff hours. There are also special unpaid leave absences for which the employer is not required to pay the employee, but they must credit their hours of service as if they worked, these absences include: jury duty, FMLA and military duty.

A variable hour employee has reached eligibility if at the completion of the measurement period, they have averaged at least 30 hours or more per week OR at least 130 or more hours per month.

Offering Coverage

Now that the employee who has worked enough hours to reach eligibility have been identified, it is now time to utilize the Administrative Period to notify these employees. It is important the employer offer coverage to these employees according to their medical plan documents. It is also important that employers ensure that employees who choose to elect the coverage are enrolled by the beginning of their Stability Period. If an employee chooses to waive the offered coverage, it’s recommended that the employer collects a waiver form and keeps this information for documentation purposes.

ACA Hours Tracking Have Your Head Spinning?

Integrity Data’s ACA solution provides an easy and efficient way to maintain ACA compliance, including detailed eligibility tracking for all your variable hour employees. Or, if you are ready to hand all the hard work off to someone else, we can do that too! Contact our team today for details.

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