CWA HEALTH CARE REFORM UPDATE: Full-time equivalent employees

How are “full-time equivalent” employees calculated?

The recent announcement of the delay of the employer mandate noted that simplified rules on how business will report data will be issued this summer. New, simplified rules for employers will be released in the coming months followed by a year of testing and fine tuning before employers will be expected to comply. This means that current rules will be subject to change. The following is an explanation of the rules as they stand now.

Only “full-time equivalent” employees are counted toward the employer mandate to provide coverage. The ACA defines full-time work as an average of 30 hours per week, or 130 hours per month. This includes hours worked as well as any other hours that the employee receives pay for including vacation, holiday, disability, illness or other paid absences. Any workers who are paid for less than 30 hours a week on average are considered part-time for the purposes of the ACA, and do not trigger penalties for their employers.

To determine worker status, an employer may choose to continually track hours of service by employees and report employee status to the IRS on a monthly basis. However, the IRS has also released rules that give employers an option to simplify this process:

1. Employer designates a “Measurement Period” of 3-12 months that will be used to determine the full-time/part-time status of employees.
2. This determination will remain in effect throughout the following “Stability Period” of 6-12 months, though it cannot be shorter than the measurement period.
3. Between these two periods employers may also have a 90-day “Administrative Period” to determine statuses, sign employees up for coverage, and perform other administrative functions.

For more information, see Potential Employer Penalties Under the Patient Protection and Affordable Care Act (ACA).