By Steven T. Feldbauer, J.D.
Many employers are already aware that the Affordable Care Act (“ACA”) contains “Employer Mandate” or “Play or Pay” provisions that will impose penalties for failing to provide affordable minimum essential health insurance coverage to full-time employees. However, with respect to determining full-time employee status especially for adjunct faculty, the “devil is in the details.” Because a full-time employee under the ACA generally means an employee who is actually employed on average at least 30 hours per week, determining which employees could cause potential penalties under this lower than normal threshold is turning out to be problematic, especially for variable-hour employees such as adjunct faculty or campus personnel who have irregular hours or even work schedules that do not extend a full year.
Due to the complexity of the rules, the best recommendation we can make is to begin to seek guidance from your tax advisor on how to make these determinations now. For employers who are schools (e.g. colleges, universities, trade schools, specialty schools, etc.), there are detailed “Hours of Service” requirements and guidance provided in the Proposed Regulations issued by the Treasury Department as well as existing Department of Labor (“DOL”) regulations.
”Hours of Service” Guidance for Education Employees
The Proposed Regulations provide that “hours of service” generally include both hours paid for service and all hours for paid time off. The ACA hours of service determination must be calculated in a manner that is consistent with the DOL’s existing “hours of service” requirements that generally apply to retirement plan eligibility and vesting determinations. Under the Proposed Regulations, an employer is allowed to use several available Equivalency Methods for different classifications of non-hourly employees.
However, the Preamble to the Proposed Regulations acknowledge that the Equivalency Methods may not work well for certain employees, such as adjuncts, whose compensation may not be based primarily on hours and who may have unusual work schedules. Schools often pay adjuncts based on credit hours taught and do not keep track of the number of hours adjuncts work outside the classroom on work-related tasks such as preparation time for class, student and faculty meetings, reviewing student assignments, and grading. Therefore, the Preamble to the Proposed Regulations provides that, until further guidance is issued on adjuncts, schools with adjuncts should use a reasonable method of crediting hours of service for adjuncts that is consistent with the Employer Mandate purposes of the ACA. In describing a “reasonable method,” the Proposed Regulations further provide:
A method of crediting hours would not be reasonable if it took into account only some of an employee’s hours of service with the effect of recharacterizing, as non-fulltime, an employee in a position that traditionally involves more than 30 hours of service per week. For example, it would not be a reasonable method of crediting hours…in the case of an instructor, such as an adjunct faculty member, to take into account only classroom or other instruction time and not other hours that are necessary to perform the employee’s duties, such as class preparation time.
Your McClintock & Associates tax advisor will be able to assist with this uncertain guidance from the IRS as well as assist with the general hours of service calculation methodologies contained in the Proposed Regulations.
Volume 1, Issue 1
Winter 2014