Beware of this little-known Obamacare reporting snag

How your company categorizes employees as full-time may not jibe with the Affordable Care Act.
You may even have part-time workers who are still actually considered full-time equivalent (FTEs) employees under Obamacare – due to a wrinkle in the calculation formula.

That’s an alarming scenario employment attorney Keith McMurdy explained recently.

The ‘measurement period’

To calculate full-time status under the ACA, there’s a “measurement period” where employers must track the hours worked by variable-hour employees to see if they averaged at least 30-hours per workweek – the minimum amount of hours to be considered full-time.

The measurement period must be at least three months long. After the measurement period, employees enter a “stability period,” which must be at least as long as the measurement period or six months, whichever period is longer.

It’s during this stability period that an employee’s full- or part-time status is locked in.

How companies can run into trouble

Here’s an example McMurdy uses to illustrate just how easily a mistake can be made: Say a company has an employee whose hours dropped below the 30-hour-per-week threshold at the start of 2015.

Because of this, the company naturally assumes that worker is no longer an FTE under Obamacare – and elects not to offer healthcare coverage as a result.

Sounds logical – but the measurement period that employer used is wrong.

Why? If the employee’s measurement period ended at or near the end of 2014 (before hours were reduced) and that worker averaged at least 30 hours per week, he or she would be a full-timer.

That means the company has to either offer the worker – a worker who currently works under 30 hours per week – healthcare benefits or pay the health reform law’s noncompliance penalties.

The employee could lose healthcare eligibility later in 2015. But according to Obamacare regs, he or she must be considered an FTE for at least six months after the measurement period and no shorter than the measurement period.

Adapted from “In Like a Lion or a Lamb? ACA Compliance Begins” by Keith McMurdy.