2015 Employee Eligibility IssuesJanuary 24, 2014
There are several classes of employees that may require evaluation to determine whether they need to be offered coverage or not in 2015, including interns, other short-term hires, and variable hour employees.
Short-Term Hires and Paid Interns
If subject to §4980H, employers cannot take into account the projected duration of an employee’s employment when determining who is a full-time employee that is eligible for medical coverage. Therefore, short-term employees (including paid interns) working at least 30 hours a week may need to be offered coverage in order to avoid one or both §4980H penalties.
We recommend that you evaluate your short-term hires and internship programs as follows, assuming you already offer coverage to all other employees working at least 30 hours per week:
- If short-term employees and interns comprise less than 5% of your full-time employee monthly population and you do not want to offer them coverage:
- The larger §4980H(a) penalty will be avoided because you have offered coverage to at least 95% of your full-time population.
- The smaller §4980H(b) penalty can still apply to a short-term hire or intern that receives the federal subsidy. This penalty is assessed each month unless the employee is benefit eligible starting the 4th calendar month of employment. This penalty may be less than the cost to provide coverage and to administer COBRA. Additionally, the risk of incurring the penalty may be minimal, considering interns often already have coverage through their parents or school program. (Other short-term hires may not have other coverage and therefore may increase your risk of incurring the penalty.)
- If short-term employees and interns comprise 5% or more of your full-time employee monthly population, then consider the following actions to reduce liability for both penalties:
- Cap work schedules at 29 hours per week so that interns are not considered full-time employees; or
- Offer medical coverage and determine cost implications:
- Interns often already have coverage through parents or a school insurance program and may waive coverage. Other short-term hires may not have other coverage.
- The §4980H(b) penalty may still be assessed because the offered coverage may be “unaffordable”, especially if interns are low paid. The short-term employee or intern could decline employer coverage if “unaffordable” in favor of a federal subsidy on the Health Insurance Marketplace. This penalty is assessed monthly and may be less than the cost to provide coverage and to administer COBRA.
Keller is working with our clients who currently have a significant number of short-term hires or large internship programs. If you need assistance at this time, please contact your Keller account team.
Variable Hour and Seasonal Employees
At date of hire, if you cannot reasonably determine if some employees are expected to work on a full-time basis because their hours are variable or uncertain, you may have variable hour employees. If you have variable hour employees that could work 30 or more hours per week during the year and are not currently considered eligible for coverage, start tracking work hours for them now. If they average at least 30 hours per week during your 2014 measurement period, you may need to offer them medical coverage as early as January 1, 2015.
If an employee is hired to work for a specific season, such as the tax, ski, summer, or holiday season, etc., the season is six months or less, and the season occurs at generally the same time each year, then you may have a seasonal employee. Even if a seasonal employee is expected to work 30 or more hours per week, the employee can be treated as a variable hour employee and measured to determine whether they must be offered benefits. If your internship program is seasonal, your interns might be seasonal employees rather than short-term employees.
If you need assistance determining which employees are variable hour or seasonal or in setting up measurement and stability periods for your variable hour and seasonal employees, please contact your Keller account team.