Hamby's Hints

At the beginning of 2013, the Treasury released proposed regulations (which may be relied upon until the issuance of final regulations) providing guidance with respect to determination of an employee's hours worked.  For hourly employees, an employer counts actual hours worked plus hours for which an employee is paid, such as vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. For salaried employees, hours may be determined using actual hours worked (similar to hourly employees).  Alternatively, an employer may determine hours worked based upon a days-worked equivalency method whereby the employee is credited with eight (8) hours of service for each day worked or a weeks-worked equivalency method whereby the employee is credited with 40 hours of service for each week worked.  



Other Benefits Reminders

HIPAA Omnibus Rule (Compliance Required by September 23, 2013).
The HIPAA Omnibus Rule (the “Rule”), published on January 25, 2013, significantly revises certain aspects of the HIPAA regulations concerning privacy, security, enforcement, and breach notification.  As a result of the Rule, employer plan sponsors and health plans may need to modify the Notice of Privacy Practices, HIPAA authorization forms, Business Associate Agreements, and HIPAA Privacy Policies and Procedures.  The Rule was effective on March 26, 2013 and compliance with most of the provisions under the new Rule is required no later than September 23, 2013.

 

Hamby's HR Alert 

September 2013


The requirement that employers provide affordable health insurance to employees (the "Employer Mandate") and the associated "pay or play" penalty under health care reform has been delayed until 2015. Whether an employer is subject to the Employer Mandate along with the amount of the Employer Mandate penalty (if any) will be determined by the number of an employer's full-time employees (FTEs). The Department of Treasury (the "Treasury") and IRS have provided safe harbor methods for determining FTE status that include lookback measurement periods varying in length from the prior three to 12 months. Therefore, although the Employer Mandate has been delayed by one year, employers should not delay deciding and implementing measurement periods to determine which employees are FTEs. The guidance provided by the Treasury and IRS provides safe harbor methods for determining FTE status for the following two general classifications of employees:   
  • Ongoing employees, or
  • New Employees (non-variable, variable, seasonal)
This HR Alert addresses the safe harbor method for determining FTE status for ongoing employees. Next month’s HR Alert will address the safe harbor method for determining FTE status for new employees.
 

What is the Safe Harbor Method for Determining FTE Status for Ongoing Employees?

An ongoing employee is generally an employee who has been employed by the employer for at least one complete standard measurement period (a defined time period of between three (3) to twelve (12) consecutive months).  The employer is allowed to determine the months in which the standard measurement period begins and ends. If the employee works at least 30 hours per week or 130 hours per month) during the standard measurement period, the employer must treat the employee as a full-time employee during a subsequent stability period (a period of at least six (6) months that is no shorter in duration than the standard measurement period) regardless of the employee’s number of hours of service during the stability period. The employer may also adopt an administrative period of up to 90 days between the standard measurement period and stability period. 

Example:


In October 2013, Employer A designates the following periods for determining FTE status for ongoing employees:

Standard Measurement Period: January 1- October 30

Administrative Period: October 31- December 31

Stability Period: January 1 - December 31


Employee A works full-time during 2012 and 2013 and also during the first standard measurement period (January 1, 2014 - October 30, 2014) designated by Employer A.  Therefore, beginning January 1, 2015, Employee A must be offered coverage for the entire stability period (January 1, 2015 – December 31, 2015). 

Employer Decision Points:
Beginning in 2013, employers should make the following decisions with respect to determining FTE status for ongoing employees: 

  • Determine commencement date and length of standard measurement period 
  • Determine whether to include an administrative period and if so, the length of the administrative period
  • Determine whether the length of the stability period for ongoing employees will be identical to the standard measurement period or longer
  • Determine what happens if Employee A incurs a change in status (i.e., changes to a part-time position with the employer) during the stability period.  Will the employer terminate Employee A's health coverage? Alternatively, will the employer continue to provide health coverage to employees who incur a change in status mid-year until the end of the stability period in which the change in status occurs?
This HR Alert was written by:
 
Anne Tyler Hamby
ERISA Attorney
3525 Piedmont Rd NE
7 Piedmont Center, Suite 300
Atlanta, GA 30305
(678) 929-9264 (office)
(404) 861-7441 (cell)
athamby@hambybenefitslawllc.com
Specializing in retirement plans, health and
welfare benefits and executive compensation law

This HR Alert is intended to provide a summary of significant developments to clients and friends.  It is intended to be informational and does not constitute legal advice regarding any specific situation.  This material may also be considered attorney advertising under rules of certain jurisdictions.
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