The IRS recently issued notices 2012-58 and 2012-59 to provide guidance on certain new rules under the Patient Protection and Affordable Care Act (PPACA). Notice 2012-58 describes safe harbor methods that employers may use to determine which employees should be treated as full-time employees for purposes of the penalties under Section 4980H. The section imposes a penalty on large employers (i.e., employers with at least 50 full-time equivalent employees) that either do not offer coverage to employees or offer coverage that is inadequate and have at least one employee who has enrolled in a nonemployer insurance program with government financial assistance. The penalty under Section 4980H is $166.66 per employee per month for failing to offer coverage and $200 per employee per month for offering inadequate coverage. The $166.66 monthly penalty is assessed for each full-time equivalent employee in excess of 30, and the $200 monthly penalty is assessed only for those employees whose coverage is inadequate.
Notice 2012-58 addresses several situations and approaches, including the use of a look-back method, that employers may use to determine whether an employee who works variable hours or is a seasonal worker is a full-time employee for purposes of Section 4980H. A full-time employee is defined as an employee who works 30 hours or more a week.
Notice 2012-58 addresses the determination of full-time employee status for both existing employees and new employees. For example, it provides that a new employee who is not expected to work full time can be employed without health insurance for an initial measurement period of between three and 12 months, as determined by the employer, during which time the employee's hours are tracked. If at the end of that period, it is clear that the employee worked an average of 30 hours a week or more, the employer must offer health insurance to the employee for a period of at least six months or for the length of the initial measurement period (referred to as the "stability period"), whichever is longer. If the employee worked on average fewer than 30 hours per week, the employer may treat the employee as part-time for the stability period.
In Notice 2012-59, the IRS issued temporary guidance regarding the 90-day waiting period limitation in PPACA. For plan years beginning on or after Jan. 1, 2014, a group health plan cannot apply a waiting period that exceeds 90 days. The IRS plans to issue regulations regarding the 90-day waiting period, but taxpayers can rely on Notice 2012-59 until at least Dec. 31, 2014. New employees reasonably expected to be full-time cannot be required to wait more than 90 days to be enrolled in coverage offered by an employer. An employer may impose a measurement period on a variable-hour employee before determining whether the employee is a full-time employee.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
