Tuesday, May 31, 2016

Employee Eligibility: Determining Status Based on Hours of Service

One of the most important parts of ACA compliance is making sure you make the right offers of coverage to the employees who meet the right amount of hours as dictated by the IRS. Applicable Large Employers (ALEs) must offer at least the minimum amount of coverage as dictated by the ACA to their full-time employees, keeping in mind that the IRS considers 30+ hours a week (130+ hours/month) to be full-time.

So when counting up the hours of your employees, what hours do you need to take into consideration? Well, obviously just the hours the employee worked, right? Sort of. An employee’s hours of service include each hour for which the employee is paid and the hours for which the employee is entitled to payment but no job duties are performed. These hours can include:
  • Paid Family and Medical Leave of Absence (FMLA)
  • Vacation days
  • Sick days
  • Jury duty
  • Military duty

When it comes to what not to count for hours of service, the ACA has an answer for that as well. Excluded from your total tally of hours of service are:
  • Volunteer hours
  • Work study program hours (performed by students, interns)
  • Religious Orders
    • In other words, you don’t need to count service hours for someone “subject to a vow of poverty” who is performing the duties usually required of an active member of the order.
    • This exception is only used in calculating full-time status, not ALE status.
  • Hours paid with foreign-source income

So when you determine the hours your employees have worked, you can do it one of three ways:
  1. By calculating the actual hours of service each month for each employee (this may be more difficult for salaried employees)
  2. By totalling the number of days each month the employee did eight (8) hours of work
  3. By totalling the number of weeks each month the employee did 40 hours of work
ALEs can use any of these methods, but must pick one to stick to for the duration of the calendar year. You may change methods once the year is up. Methods 2 and 3 can both be used for classifying salaried employees, so long as the classifications are consistent. Methods 2 and 3 may not be used if their results understate the employee’s hours, causing them to be classified as non-full-time.

You can find more information for determining the hours of those who are difficult to identify or track (such as adjunct faculty, or those with layover or on-call hours) here.

Once you’ve determined your employees’ hours of service, it’s time to file those ACA Forms 1094 and 1095. You can do that through www.ExpressIRSForms.com. Simply create a free account to get started. If you need help or have any questions, give us a call at (704) 684-4751, Monday through Friday, 9:00 a.m. to 6:00 p.m. EDT. We’re also available 24/7 through email: support@ExpressIRSForms.com.

Looking for something a little less hands on? Try our full-service e-filing option, ExpressACAForms.

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