Tracking Variable Hour Employees: Understanding Measurement and Administrative Periods
Employers with variable hour employees face unique challenges when it comes to tracking hours and determining health insurance eligibility. Under the Affordable Care Act (ACA), businesses must use specific methods to measure employee hours and ensure compliance with health coverage requirements. Understanding the look-back measurement period, administrative periods, and stability period is crucial for staying compliant and avoiding penalties.
Please note, only employers with 50 or more full-time equivalent (FTE) employees are required to offer health insurance.
The Look-Back Measurement Period
The look-back measurement period is used to determine whether a variable hour employee qualifies as a full-time employee (30 or more hours per week) under the ACA. Employers can select a measurement period between 3 and 12 months to track an employee's hours worked. If the employee averages at least 30 hours per week over this period, they are considered full-time and must be offered health insurance coverage.
The Administrative Period
The administrative period allows employers time to review hours, determine eligibility, and complete the necessary steps to offer coverage. This period cannot exceed 90 days and typically follows the look-back measurement period. it is important to note that the administrative period should not create a gap in coverage if an employee is determined to be eligible.
The Stability Period
Once an employee is deemed full-time, they must be offered health insurance for a stability period, which must be at least as long as the measurement period but no shorter than six months. Even if the employee's hours drop below full-time during the stability period, they remain eligible for coverage until the end of this period.
Who is Eligible for Health Insurance?
An employee is eligible for employer-sponsored health insurance if they work an average of 30 or more hours per week during the look-back measurement period. Full-time employees (those with a consistent schedule of 30+ hours per week) are generally eligible immediately, while variable hour employees must first complete a measurement period.
How Long Are Employees Eligible?
Once an employee qualifies for health insurance, they remain eligible throughout the stability period, regardless of any fluctuations in their work hours. If they continue to meet full-time criteria in subsequent measurement periods, their eligibility continues. If their average hours fall below 30 during a measurement period, they may lose eligibility once the stability period ends.
Key Takeaways for Employers
1. Chose a Measurement Period: Employers must select a look-back measurement period (3-12 months) to assess variable hour employees' eligibility
2. Account for Administrative Processing: The administrative period allows time to determine eligibility and offer coverage but cannot delay or shorten an eligible employee's access to benefits.
3. Maintain Stability Period Compliance: Employees determined to be full-time must receive coverage for the entre stability period, even if their hours decrease.
4. Avoid Penalties: Failure to properly track and offer coverage to eligible employees can result in significant ACA penalties.
Properly tracking variable hour employees and adhering to ACA guidelines ensures compliance and provides employees with the benefits they are required to be offered. Employers should review their policies regularly and leverage technology to streamline the tracking process. Have additional questions? Contact your Rose Street Advisors team today! If you are not a current client of Rose Street Advisors, please feel free to contact us at 260-552-3200 or contact@rosestreetadvisors.com to speak to someone.