Not necessarily. The IRS Affordable Care Act regulations permit you to use one of two methods to determine whether your employees are full-time employees: (1) the look-back measurement method, and (2) the monthly measurement method. 26 CFR 54.4980H-3(a). While the general rule is that a “full-time employee” is “an employee who is employed on average at least 30 hours of service per week,” each method may result in different outcomes for a particular employee. Under either method, an employee can work for 30 hours or more in a single week without being classified as a full-time employee, depending on your measurement method and on how many hours the employee works during other weeks.
Below, we have summarized both the look-back measurement method and the monthly measurement method. However, we note that these rules are extremely complicated, and we recommend consulting with bank counsel and your health insurance broker should you have any doubt as to an individual employee’s status. Also note that different rules apply to “new” versus “ongoing” employees, and the methods summarized below apply only to ongoing employees, not to new hires.
Look-Back Measurement Method
Under the look-back measurement method, an employee’s full-time status is established during a “standard measurement period.” If an employee is qualified as a full-time employee during this period, the employee retains that full-time status throughout a future “stability period.” Under the look-back measurement method, an employee does not qualify as a full-time employee if the employee’s average hours over the standard measurement period remain under 30 hours per week, even if the employee works over 30 hours in a particular week (or over 120 hours in a particular month).
The employer chooses the length of the standard measurement period, which can range from three to twelve months, and the employer must use the same standard measurement period for all employees in the same category. 26 CFR 54.4980H-1(a)(46)26 CFR 54.4980H-3(d)(1)(i). If the employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employee must be treated as a full-time employee throughout a subsequent “stability period,” even if the employee’s hours change during that stability period. 26 CFR 54.4980H-3(d)(1)(i). The stability period must be at least six months long and can be no shorter than the standard measurement period. 26 CFR 54.4980H-3(d)(1)(iii). (For example, if an employer chooses a standard measurement period of one year, and an employee averages at least 30 hours per week during that year, then the employee must be treated as a full-time employee for the entire next year.)
Employers also may adopt an optional “administrative period” that begins after the standard measurement period ends and that ends before the stability period begins. The administrative period is meant to address situations when an employer might not know which employees will qualify as full-time until after the standard measurement period ends. In essence, it provides employers with a grace period to take care of the administrative tasks necessary to enroll employees who qualify as full-time in the employer’s health insurance plan. The administrative period can last up to ninety days. See 26 CFR 54.4980H-3(d)(1)(vi) for the rules and illustrative examples that apply to administrative periods.
To summarize, below is a timeline of the various time periods that could apply under the look-back measurement method:
- Standard Measurement Period: 3 – 12 months
- Optional Administrative Period: Up to 90 days
- Stability Period: 6 – 12 months
Monthly Measurement Method
Under the monthly measurement method, an employee’s full-time status can change from month to month. If an employee worked more than a certain amount of hours during the month (depending on the number of weeks in the month), then the employee is considered a full-time employee for that month. For months with four weeks, the threshold number of hours necessary to be considered a full-time employee is 120 hours. For months with five weeks, the threshold number of hours necessary to be considered a full-time employee is 150 hours. 26 CFR 54.4980H-1(a)(21)(iii). Under this measurement method, an employee could work over 30 hours in a particular week without becoming a full-time employee, provided that the employee’s hours do not total 120 or 150 hours or more for the month, as applicable.
One wrinkle in the monthly measurement method is that each month could have a different threshold number — 120 hours or 150 hours — depending on whether the month is considered to be four or five weeks long. To determine whether a month is considered four weeks long or five weeks long, you must consistently use one of two methods for handling partial weeks (weeks where either the first day of the month does not fall on the first day of the week, or where the last day of the month does not fall on the last day of the week).
- Monthly Measurement Method 1: Under the first method, if a month starts out with a partial week, you count the first week of the month as a full week, in which case you do not count the last week of the month as a full week (unless the last day of the month is on the last day of the week).
- Monthly Measurement Method 2: Under the second method, if a month starts out with a partial week, you do not count the first week of the month as a full week (unless the first day of the month is on the first day of the week), in which case you do count the last week of the month as a full week, even if the last week is a partial week.
While most months will result in the same number of weeks under both methods, the days on which you must start counting an employee’s hours will be different under each method. For example, assume that you count weeks as starting on Mondays and ending on Sundays. (Note that you may select a different day to start each week, provided that you do so consistently. 26 CFR 54.4980H-1(a)(50).) Since March of 2014 started on Saturday, March 1, and ended on Monday, March 31, the month of March started and ended with partial weeks. Under both counting methods, March was a five-week month, meaning that the threshold amount of hours for March, 2014, was 150 hours.
However, the start and end dates of March of 2014 are different, depending on which method is used, which changes the calendar period for determining the 150 hours, as follows:
- Monthly Measurement Method 1: March 2014 begins with a partial week (with the first day of the month on a Saturday), which we count as a full week under this method. But we do not count the last week of March, since that week does not end with the last day of March (which is a Monday). Under this method, an employer would need to track an employee’s “March” hours from February 24 to March 30. If an employee worked at least 150 hours during this period (since March is a five-week month), the employee is a full-time employee.
- Monthly Measurement Method 2: March 2014 begins with a partial week (with the first day of the month on a Saturday), but we do not count the first week under this method. However, we do count the last week of March, even though it is a partial week. Under this method, an employer would need to track an employee’s “March” hours from March 3 to April 6. If an employee worked at least 150 hours during this period (since March is a five-week month), the employee is a full-time employee.
Choosing Measurement Methods
Note that you do not need to use the same measurement method for every employee. The rules permit you to use different measurement methods for different categories of employees. The only proviso is that employees who are in the same category must be treated consistently, using the same measurement method. The categories of employees who must be treated consistently are:
- Collectively bargained employees and non-collectively bargained employees
- Each group of collectively bargained employees covered by a separate collective bargaining agreement
- Salaried employees and hourly employees
- Employees whose primary places of employment are in different States
We hope this brief overview of the law is helpful in providing you some direction regarding your question. Again, we recommend consulting with your bank or employment counsel and your health insurance broker should you have any doubt as to an individual employee’s status.