Human Resources News & Insights

Determining full-time employees for ‘pay or play’

The feds just unveiled formulas employers may need to use to determine who is a full-time employee when figuring out their obligations under the healthcare reform law’s “pay or play” mandate.

The formulas are not set in stone just yet. The Treasury Department and Internal Revenue Service (IRS) are asking for employers’ input on the proposed formulas.

Under the reform law, starting in 2014 employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees will be required to make a shared responsibility payment — $2,000 for each full-time employee not offered coverage.

The definition of a full-time employee — as it pertains to the “pay or play” provision — is someone who works an average of at least 30 hours per week.

Calculating an employee’s average hours worked

One approach for determining whether an employee meets that 30-hour threshold, as suggested by the Treasury in Notice 2011-36:

An employer would look back at a defined period of not less than three months — but not more than 12 consecutive months — to determine if the employee worked an average of 30 hours per week (or, under rules being considered for the final regulations, at least 130 hours per month) during that measurement period.

If the employee worked 30 hours per week (or possibly 130 per month) on average during that measurement period, the person will be considered a full-time employee during a subsequent “stability” period — no matter the number of hours the employee worked during that stability period.

The stability period would then last six consecutive months after the measurement period.

If the employee isn’t found to have been a full-time employee during a measurement period, the individual wouldn’t be counted when the employer calculates its full-time employees during the subsequent stability period.

Not a fan? Now’s the time to speak up

If you have some reservations about the Treasury’s suggested formulas, now’s the time to offer your suggestions.

The IRS and Treasury are seeking input on how best to implement the shared responsibility provision.

The public comments they receive will be taken into account when the agencies draft guidance on how to comply with the provision.

Two ways to submit comments:

  • E-mail to:
    Notice.Comments@irscounsel.treas.gov.
    Be sure to include “Notice 2011-36” in the subject line.
  • Mail to:
    Internal Revenue Service
    CC:PA:LPD:PR (Notice 2011-36)
    Room 5203, P.O. Box 7604
    Ben Franklin Station, Washington, DC 20044
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