Affordable Care Act Information
In general terms, the Affordable Care Act is a federal law that requires every American citizen to have a minimum level of health care insurance. Many groups are affected by the law. PowerSchool clients fall under the employer group. The Affordable Care Act requires employers to track health care plans offered to employees and track hours worked by employees to determine an employee's full time status and eligibility for health care insurance.
The information aims to provide an overview of the known requirements of the Affordable Care Act. However, PowerSchool is not providing tax/legal advice or details for handling specific individual cases. Refer to the IRS documentation (www.irs.gov) for complete details and consult with your legal counsel for advice on compliance with the Patient Protection and Affordable Care Act.
What does my organization need to do?
PowerSchool clients who have substitutes or other part-time employees that average more than 30 hours per week or 130 hours per month and are not offered affordable healthcare need to:
Identify these employees.
Determine whether to:
Provide healthcare
Make sure their hours don't average more than 30 hours per week or 130 hours per month
Track hours for all employees who are not offered healthcare.
The Importance of Identifying Full-Time Employees
The Affordable Care Act offers options for determining an employee's full-time status.
Determine eligibility on a monthly basis and offer month by month health insurance for employees whose hours fluctuate.
Use a look-back measurement period to determine eligibility.
Play or Pay Penalties
Section 4980H(a) - Employer must offer coverage to 95% of full-time employees or potentially pay a No Coverage penalty.
Section 4980H(b) - Employer must offer affordable coverage to full-time employees or potentially pay an Affordability penalty.
Both penalties are triggered by a full-time employee obtaining a premium subsidy from a state health insurance exchange. The law's current definition of a full-time employee is someone who works an average of 30 hours per week or 130 hours per month. Full-time employee status is only used to determine whether the employer owes a Play or Pay penalty. If an employee is offered affordable coverage, their full-time employee status is irrelevant.
Affordable Care Act Terminology
Look-Back Measurement Period | The period of time used to determine an employee's Full-Time status.
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Administrative Period | An optional period of time between the Look-Back Measurement Period and Stability Period.
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Stability Period | The period of time during which an employee is considered Full Time.
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Standard Measurement Period | A fixed period of 3 to 12 consecutive calendar months.
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Ongoing Employee | An employee who has completed one Standard Measurement Period. |
New Employee | An employee hired during the Standard Measurement Period. |
Average Hours of Service
Hours of Service
Hours Worked - Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer.
PLUS
Paid Time Off - Each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.
Standard Measurement Period Average Hours of Service
Impact of Summer Vacation and Similar Breaks (Educational Organizations Only).
If an employee is not credited with any hours of service during an employment break of at least four consecutive weeks, e.g. summer break, average weekly hours of service is calculated by either:
Ignoring periods of employment break.
Crediting hours of service for the period of employment break.
New Employees
Employers will establish an initial measurement period based on an employee's hire date if at that time the employee works variable hours and it cannot be determined whether the employee will meet the requirements for full time status. The initial measurement period can be 3-12 months. This initial measurement period will generally be the same length as the standard measurement period for ongoing employees.
If the new employee qualifies for full time status at the end of the initial measurement period, the employer must offer health care for the initial stability period, which must be the same length as the initial measurement period, or potentially face penalties. The initial stability period is the same length as the employer's standard stability period for this category of ongoing employees.
When these new employees have been employed for an entire standard measurement period, they must also be evaluated for the standard measurement period. If the new employee qualifies for full time status during the standard measurement period, health care must be offered for the standard stability period even if the employee did not qualify during the overlapping initial measurement period. If, on the other hand, the employee does not qualify as full time during the standard measurement period but did qualify during the initial measurement period, health care must continue to be offered through the initial stability period.
For more details about how to handle new employee, refer to IRS Notice 2012 - 58.
Breaks in Service
The Affordable Care Act rules for employees with breaks in service should be reviewed to determine whether employees should be offered health care.
Summer Vacation (and similar breaks) | If an employee is not credited with any hours of service during an employment break of at least four consecutive weeks (summer break for example), average weekly hours of service is calculated by either:
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Leave of Absence | If an employee is absent during standard measurement period due to unpaid FMLA, USERRA (military duty) or jury duty leave, average weekly hours of service is calculated by either:
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Reporting Requirements
Under section 6056, employers must report the cost of health insurance and provide statements to employees. Electronic reporting will be required if employers have more than 250 employees.