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Part-time Employee Moving to Full-time Status, Initial Measurement Period


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My apologies if this has been asked and answered; I haven't seen it yet.

Employer offers coverage to all employees working 20+ hours per week, with employee cost and coverage options identical regardless of hours worked. New employee in initial measurement period working 20 hours per week transfers to a new position that would have been 30+ hours per week if new employee had been hired into it. New employee is not yet in the administrative period.

Does the employer have to re-offer coverage, consistent with the ACA timing rules, when the employee moves to the new position, or is the initial offer of coverage when hired into the 20 hour per week position enough for the employer to avoid an ACA penalty?

Thank you for any insights!

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The concern is that the initial offer, when the employee began in a part-time position, would not cover an offer required to be made when the employee moved to a full-time position during the initial measurement period. Or, maybe more precisely, that an individual moving from part-time to full-time status during the initial measurement period must be offered coverage due to the status change regardless of whether he or she was offered coverage as a part-time employee at the time of hire.

The rule is quite clear that coverage must be offered to the formerly part-time now full-time employee by the end of the required period (to paraphrase) in order to avoid a penalty, but the rule seems to contemplate a situation in which a part-time employee has not already been offered coverage. Further, it's not entirely clear (at least to me) whether the coverage must be offered between the date of status change and the end of the required period, or at any point prior to the end of the required period (including before the status change).

I don't think you're missing anything--my own view is that the initial offer is enough, but I can see why the IRS might disagree so thought I'd consult the brain trust. That said, the cafeteria plan rules (obviously different than the ACA rules but implicated in this question) would not allow an election change in this situation, barring a separate election change event of course. The IRS updated the cafeteria plan rules to allow an election change in two situations created by the ACA but did not make any updates related to this situation. This also leads me to believe that the first coverage offer was enough. But I can see how the IRS might argue that as a policy matter coverage needs to be offered again, and failure to offer the coverage would result in a penalty.

Thank you for your response! And sorry if mine's a bit rambly.

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I believe you may be confused on the penalty issue, (The rule is quite clear that coverage must be offered to the formerly part-time now full-time employee by the end of the required period (to paraphrase) in order to avoid a penalty) because the penalty is applicable if someone from the group obtains a credit via the exchange. It is possible, though not probably, that an employer could offer a plan of benefits that is not affordable nor meets minimum value and not get fined. If no one obtains the credit, than the employer is ok.

That being said, and I am not an attorney, but I believe the employer is ok because they offered the plan to the employee before they were required to offer.

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Thanks for your response. I made some assumptions about what a reader would know when drafting this question, on which you've now taken me to task. (Good for you.) You're right that the (b) penalty can only be assessed if the employee gets Exchange coverage and qualifies for a subsidy. This could happen for a part-time employee even if the coverage is "affordable" for a full-time employee. So, an employee who was part-time and received a subsidy while part-time could move to full-time and, if not offered the opportunity to enroll in coverage once becoming full-time, cause the employer to be assessed a penalty I think. (Which means I might be talking myself out of my initial position.)

Maybe an example would be more clear. Employee is hired on January 1 as a part-time employee and offered coverage, which employee turns down. Employee gets coverage on the Exchange and qualifies for a subsidy. Employee moves to full-time status on June 15. Employee is not offered coverage and, if still receiving a subsidy (because income did not go up enough to lose it), will cause the employer to be assessed a penalty for months October through December. I think?

This may seem like a crazy law school hypothetical, but the client is in retail so this fact pattern would not be impossible.

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Maybe I am wrong, but I assumed that the coverage offered satisfied both the affordability and MV. So if the employee was offered affordable and MV coverage on 1/1 and turned it down, the employer cannot be penalized.

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