Employee Status

Employee Statuses

The Qualified Small Employer HRA requires that the benefit be offered to all Full-Time Permanant employees that work an average of 30 hours per week. What does that mean? How does one know if an employee has to be included? In this section we will answer those questions by defining employee statuses.

Full-Time Employee

A full-time employee is an individual reasonably expected to work at least 30 hours per week. For this purpose, “hours” include each hour for which an employee is paid or entitled to payment for performing duties for the employer or entitled to payment even if no work is done (e.g. holiday, vacation or sick time).

Employees with variable hours may also be considered fulltime, benefits eligible employees if they work an average of 30 hours or more per week during a look-back measurement period. Temporary (short-term) employees and seasonal employees may also be considered full time.

Variable Hour Employees

The ACA defines an employee as variable hour if, based on the facts and circumstances on the employee’s start date, an employer cannot determine whether the employee is reasonably expected to work an average of at least 30 hours per week during the initial measurement period because the employee’s hours are variable or uncertain.

There are a number of factors to consider in evaluating whether it is reasonable to determine that a new employee is a variable-hour employee, including but not limited to:

1. whether the employee is replacing an employee who was or was not a full-time employee,
2. the extent to which employees in the same or comparable positions are or are not full-time employees, and
3. whether the job was advertised, communicated to the new hire or otherwise documented (for example, through a contract or job description), as requiring hours of service that will average 30 or more hours of service per week or less than 30 hours of service per week.

No single factor is determinative, and other factors may be considered.

Seasonal Employees

Under the final regulations issued by the IRS and Treasury Department in February 2014, new seasonal employees are treated the same as new variable-hour employees under the look-back Measurement Period method. To be considered seasonal, an employee must be hired into a position for which the customary annual employment is six months or less. “Customary” means that:

1. by the nature of the position an employee typically works for a period of six months or less, and
2. the period of employment should begin each calendar year in approximately the same part of the year, such as summer or winter.

Seasonal Employee and Seasonal Worker. The terms “seasonal employee” and “seasonal worker” are used in the employer shared responsibility provisions in two different contexts. The term “seasonal employee” is relevant for determining an employee’s status as a full-time employee under the look-back measurement method.

Temporary/Short-Term Employees

Temporary employees (referred to as short-term employees under the ACA), are those employees hired into a position that is less than 12 months in length. The IRS has confirmed that there is not an exemption under the IRC Section 4980H penalties for temporary, short-term employees (unless the employee meets all of the seasonal employee requirements as outlined above).

If temporary/short-term employees do not meet the seasonal employee requirements and are expected to work more than 30 hours per week, then under applicable ACA rules they should be classified as full-time, benefits eligible employees.