Government May Provide Transitional Relief For Determining Employee Status Under ACA, Treasury Official Says

from Spencer’s Benefits Reports: The government may provide transitional relief to employers who need to determine whether their employees are part-time or full-time under the Patient Protection and Affordable Care Act (ACA), Treasury Office of Benefits Tax Counsel attorney Kevin Knopf said at a September 27, D.C. Bar program. The program focused on Notice 2012-58, I.R.B. 2012-41, which provides interim guidance for applying the employer’s shared responsibility payment.

The shared responsibility payment takes effect Jan. 1, 2014. Employers may owe a payment for each of their full-time employees who are not offered minimum essential health insurance coverage under an affordable plan, if the employee is eligible to receive a premium tax credit and to enroll in coverage provided by a state or federal exchange.

Although the notice is not the same as a regulation, employers can rely on the notice until Jan. 1, 2015, which is different from prior notices, Knopf said. At the same time, the Treasury hopes to issue proposed and final regulations by the law’s effective date of January 2014, he indicated.

Employers may use look-back period. An important issue is how employers should determine who is a full-time employee and who is a part-time employee. Under Notice 2012-58, employers may use a look-back period of up to 12 months to determine an employee’s status, Knopf stated. The rules apply to an applicable large employer with at least 50 full-time equivalent employees (which includes part-time employees). However, there is no penalty for failing to provide coverage to part-time employees, Knopf noted.

Kathryn Wilber, senior counsel, health policy, American Benefits Council, Washington, D.C., said that the notice is responsive to employer concerns, but there are still many unanswered questions. For example, one issue is whether an employer can start the look-back measurement period in 2014, or must start the period in 2013, she said. Another question is whether an employer who uses a shorter look-back period for initial compliance (less than 12 months) can move to a longer look-back period. Knopf said that the government is aware of potential problems and may provide transitional relief. For example, the government might allow a short look-back period for 2014 and then require a more robust period later.

Law provides full-time standard. The law states that employees must work at least 30 hours a week, or 130 hours a month, to be considered full-time. Some have commented that they use 32 hours or 35 hours as the standard for full-time employees and would like to keep that approach, Knopf pointed out that the statute has the 30-hour minimum requirement, and that the Treasury has to follow the statute.

Wilber said that the notice provides important flexibility but is complicated. Knopf conceded the complexity but said that the goal was to give employers more flexibility so that they will need to make fewer changes to their existing arrangements. The Treasury could have provided simpler rules, but this would have given employers less flexibility to develop their programs.

According to Knopf, employers must provide uniform and consistent rules for employees in the same category. There are distinctions for several categories, such as collective bargaining/noncollective bargaining; hourly/salaried; working for different entities; and being located in different states, Knopf said.

Different treatment allowed for variable, seasonal employees. Variable-hour employees do not have to be treated as full-time if it cannot be determined whether the employee will work 30 hours a week or whether the period of employment is expected to be limited, Knopf said. Seasonal employees can be treated as variable-hour employees, assuming the employer does not know if the employee will be retained. Program moderator Seth Perretta, Crowell & Moring, Washington, D.C., asked whether any short-term employee is considered “seasonable.” Knopf replied not necessarily.

Certain types of employees are not addressed yet in any guidance. Knopf identified on-call employees; Perretta mentioned leased employees. Knopf said that the Treasury hopes to address the question of who is an employee; for example, should workers be treated as employees if they are independent contractors under Sec. 530 of the Revenue Act of 1978 (P.L. 95-600).

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