ACA Requirements when employee moves from full time to part time

We have an employee who has moved from a full-time position to a part-time position mid year.  Under the ACA, do we have to keep this employee on our benefits for the remainder of the stability period?  Or, can we terminate benefits because the employee is no longer in an eligible class?

The answer depends on the measurement method your organization uses to determine full-time status.  If you use the Look-Back method, the employee's FT status during the stability period is based on their hours worked during the preceding measurement period.  If you use the Monthly Measurement method, eligibility is determined by the actual hours worked each month.

Agreed with Leevena.

Look-Back Measurement Method
Under the look-back measurement method, ongoing employees' status as full-time or part-time is based on the results of the prior-year measurement period.  An employee who worked full-time in the prior measurement period will will retain full-time status through the end of the stability period.  The stability period generally matches the plan year.  So the employer would generally need to continue offering medical through the end of the plan year to avoid potential ACA employer mandate penalties.

Monthly Measurement Method
Under the monthly measurement method, each month stands for itself.  Once the employee drops below 130 hours of service in a given calendar month, they lose full-time status.  So the employer could drop the employee from coverage upon the first month the employee works part-time hours.

If They're Unsure
If they're not aware of which measurement method they are using to determine employees' full-time status, I recommend that they check with their ACA reporting vendor. The ACA reporting vendor will be reporting on employees' full-time status via one of those two methods on the Forms 1094-C and 1095-C. And if they're using the look-back measurement method, the vendor should have a dashboard to monitor the measurement/administrative/stability period determinations of full-time status.

COBRA
In either case of losing coverage at the end of the stability period or immediately upon working part-time, the loss of coverage will be a COBRA qualifying event.

More details:

• The ACA Look-Back Measurement Method
• The ACA Monthly Measurement Method
• Loss of Health Plan Eligibility Caused by Move to Part-Time Work

Slide summary:
2025 Newfront ACA Employer Mandate & ACA Reporting Guide

If you typically don't have a lot of full-time to part-time status changes, you can also choose not to continue coverage and count them against the 95% coverage threshold, correct? I understand that doing so could cause you to incur an affordability penalty.

Yeah I agree--COBRA would satisfy the A Penalty to offer MEC, but likely not the B Penalty to offer affordable coverage.