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Faculty, Hours and Summer Months


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Faculty at a school are only working September to May, 20 hours a week. They are paid over a 12 month period. May the employer treat the the summer months as paidt time off, creditign them ith 20 hours a week as paid time off for the summer months when they are not teaching?

So for example, if we credit the summer months as hours of service, then they will exceed 1,000 hours (vesting years, etc). If we do not count the summer months, they are below 1,000 hours.

Does the answer change if they elect to be paid over teh school year, as opposed to the calendar year?

Seems like a gray area...

Austin Powers, CPA, QPA, ERPA

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How are hours counted? Do the employees punch a clock or submit time sheets? Or are they paid a salary that is based on the equivalent of 20 hours at particular rate? I would not play fast and loose with the actual hours standard if the payroll system does not really count hours. The resolution of the counting question may avoid any need to get into the school year/calendar year conventions for academic pay.

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They stick to their scheduled hours pretty well, especially the non-full-timers who are the issue.

But when I spoke with Sungard they told me NOT to credit hours over the summer because their job is based on a 10 month year. What are your thoughts on that?

Austin Powers, CPA, QPA, ERPA

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Bypassing the dodge without further comment, I think you can justify not counting based on the definition of hours directly or indirectly paid, whether or not worked, if the 12 month payment is inviolable, even for someone who is certain not to work in the summer and certain not to return in the fall, i.e. the work period is really 10 months and the pay period is really 12 months and the summer is really irrelevant. But you might see about testing the premise. If the summer is paid time off, then I think you count the hours. What other compensation covers the summer months? How about health insurance? Is there a cafeteria plan? If you have other compensation running on a 12 month period and it would stop if the person were considered terminated, then I think the summer hours should be counted. I would look also to the regular faculty employees for any patterns or principles, especially if the part-timers are regular, but part-time. This is a 403(b) hot button The IRS currently has a fishing project going with academic institutions, so you know it is getting attention in addition to the universal availability rule.

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So you're suggesting I count the hours then, as though they worked for 12 months? If someone was eligible for health insurance, I'm certain the health insurance would continue for the entire 12 months (I can't imagine telling employees they don't have insurance over the summer). This just seems different then 8 weeks of paid vacation, especially if they could opt to be paid over a month period instead. Does this latter point change your conclusion?

It seems hard to believe that this is not addressed somewhere...

Austin Powers, CPA, QPA, ERPA

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ERISA Opinion Letter 78-27A says that paying for health benefits during a period when no services are performed does not require hours to be credited. That is based on a specific provision in the section 2530.200(b) regulations. The opinion says that payment of life insurance premiums (not subject to the expess provision of the regulations) during the period demonstrates payment for hours not worked.

If the employee can elect payment over the 10 months, that helps avoid the vacation pay conclusion, especially if there are no entanglements other than health benefits. One can argue that the 12 month option is a payroll courtesy rather than reflecting right to payment.

I am uncomfortable with aggressive interpretations about not counting service. The service counting rules tend to be liberal. I would not be stingy unless it is very important to the institution and the institution can tolerate some risk.

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This organziation is treating them as eligible. I'm the one questioning whether that is appropriate. It seemed to me most of your post was supporting NOT counting the service, but then your last comment suggested countign it. Would you mind clarifying for me what your conclusion is?

I am actually more inclined NOT to count the service. Think about a ski-resort, as opposed to a school. The lift operator, or even the ski-lodge manager, is scheduled to come back in the fall once the winter ends. I can't imagine anyone would suggest counting the summer as service.

Another mind-boggler for me. I can't believe this is not addressed somewhere.

Austin Powers, CPA, QPA, ERPA

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My experience with regulators is that they are predisposed to challenge not counting, and only wonder about counting when the circumstances are unusual and favor HCES or structurally favor HCEs.

The counting rules tend to be liberal in favor of counting. It is safe to interpret them liberally.

If an employer is holding out a benefit and wants to provide the benefits to regular employees, including part-time employees, , I am in favor of it for philosophical and policy reasons. I see no risk in edging toward overcounting (except in unusual or obviously improper circumstnaces) and I see both legal risk and employment negatives in trying too hard to achieve a close shave. If the employer wants to count, that seals it for me. If you want to show you are an alert and competent professional, by all means confirm the employer's desire along with the advice that another outcome may be possible.

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