IRS Provides Updated Hours Guidance

By McClintock & Associates | December 20, 2016

By Chad Dinco, CPA

Many companies are still trying to keep up with all the details and new regulations that the government has passed in regards to the Affordable Care Act. As with many new laws, there are often new regulations issued to help clarify and give guidance on how to comply with the new laws. On February 10, 2014, the IRS and Treasury Department issued Final Regulations that, among many changes, clarify how the calculation of hours should be made for adjunct faculty under the Affordable Care Act (“ACA”).

Updated Hours of Service Guidance for Adjunct Faculty

One of the biggest challenges that school administrators are facing in this area is how to determine how many hours a week their adjunct faculty should be credited and whether or not the faculty members should be considered full-time employees for purposes of ACA provisions. Generally, a full-time employee is an individual working 30 or more hours per week. Initial guidance was offered in July of 2013 in Proposed Regulations. However that guidance only advised school officials to use “reasonable methods.” (See initial M&A article on Affordable Care Act Guidance from our Winter 2014 Newsletter). College administrators and industry groups sought more clarity in regards to this issue.

In the Final Regulations that were issued, a “safe harbor” method of crediting hours of service to adjunct faculty was established. Under the safe harbor method, each adjunct faculty member would be credited with 2 1/4 hours of work for each hour of teaching or classroom time. In other words, in addition to crediting an hour of service for each hour of teaching in the classroom, this method would credit an additional 1 1/4 hours for activities such as class preparation and grading. The safe harbor further provides for an hour of service per week for each additional hour outside the classroom the faculty member spends performing duties he or she is required to perform, such as required office hours or required attendance at faculty meetings.

The Final Regulations state that the above safe harbor is one method that is reasonable for this purpose of the ACA, “but not the only” method that may be reasonable. If a school is able to justify and substantiate another reasonable alternative, they are permitted to do so under the regulations until further guidance is issued.

Seek Guidance Now Regarding ACA Tax Provisions That Affect Adjuncts (and All Employees)

Although various aspects of the “Employer Mandate” provision of the ACA (a.k.a., “Employer Shared Responsibility Payment” penalty provisions) have been postponed until 2015, employers should begin to plan and to comply with the provisions as soon as possible, in order ensure a smooth transition as well as allow time for proper planning before the penalty payment provisions become effective.

You should consult your McClintock & Associates tax advisor immediately regarding the proper calculation of Hours of Service and Equivalency Methods for full-time, part-time, and variable-time employees as required under ACA and DOL regulations, the determination of a reasonable method of crediting hours for adjuncts, as well as consultation related to timing issues involving new, ongoing, terminated, and rehired employees required under ACA regulations.

Volume 1, Issue 2
Spring 2014

Need help?

Schedule an appointment with one of our industry experts.