Glossary

"The standard measurement period and stability period used by an employer must be uniform for all ongoing employees. However, an employer can use different measurement, stability, and administrative periods for the following categories of employees:

• Each group of collectively bargained employees covered by a separate bargaining agreement.
• Collectively bargained and non-collectively bargained employees.
• Salaried and hourly employees.
• Employees whose primary places of employment are in different states."

For more information visit www.irs.gov and view the IRS notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage).

"The term administrative period is an optional period, selected by an applicable large employer member, of no longer than 90 days beginning immediately following the end of a measurement period and ending immediately before the start of the associated stability period."

For more information visit www.irs.gov and view the IRS notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage).

"Your employer coverage is generally considered affordable for you and for a family member if your share of the annual premiums for self-only coverage is not more than 9.56% of your tax family’s household income for 2015. For 2016, this threshold will increase to 9.66%. Self-only coverage is used for this calculation even if you have a spouse or dependents and therefore would enroll in coverage that is not self-only coverage (for example, family coverage). However, employer-sponsored coverage is not considered affordable if, when you or a family member enrolled in a qualified health plan, you gave accurate information about the availability of employer coverage to the Marketplace, and the Marketplace determined that you were eligible for APTC for the individual’s coverage in the qualified health plan. See Determining affordability at the time of enrollment, later, for more information on this rule."

For more information visit www.irs.gov and view the IRS Publication 974 (December 2015).

"An aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size."

For more information visit www.irs.gov and view the IRS publication 5196 (2/2015) Catalog Number 67464S (Understanding employer reporting requirements of the health care law).

"Your organization is an applicable large employer if you or other entities that must be combined together with your organization (for instance, other members of an aggregated group) employed an average of at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year. For example, your 2014 employee count determines if you’ll be required to track employee and health coverage information in 2015 to report in 2016. A special rule applies for 2015 for determining if you are an applicable large employer. Under this special rule you may use any consecutive six-month period during 2014, rather than being required to use all 12 months of 2014."

For more information visit www.irs.gov and view the IRS publication 5196 (2/2015) Catalog Number 67464S (Understanding employer reporting requirements of the health care law).

For the latest information about developments related to Form 1094-C Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns, Form 1095-C Employer Provided Health Insurance Offer and Coverage, and for instructions, such as legislation enacted after the forms were published, go to www.irs.gov/form1094c and www.irs.gov/form1095c.

"For purposes of the employer shared responsibility provisions, a full-time employee is, for a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month.

There are two methods for determining full-time employee status:

• The monthly measurement method, and
• The look-back measurement method.

Under the monthly measurement method, the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month.

Under the look-back measurement method, an employer may determine the status of an employee as a full-time employee during what is referred to as the stability period, based upon the hours of service of the employee in the preceding period, which is referred to as the measurement period. The look-back measurement method may not be used to determine full-time employee status for purposes of ALE status determination."

For more information visit IRS.gov or see section 54.4980H-3 of the ESRP regulations.

"An hour of service is:

• Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer, and
• 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.

Exclusion from the definition of hour of service is provided for services performed in certain capacities, which are not counted as hours of service for purposes of the employer shared responsibility provisions:

• Volunteer employees – Hours of bona fide volunteer service for a government entity or tax-exempt organization do not count as hours of service.
• Students performing work-study – Hours of service do not include hours performed by students as part of the federal work study program or a substantially similar program of a state or political subdivision.
• Members of religious orders – Until further guidance is issued, under certain circumstances, a religious order is permitted to not count as an hour of service work performed by an individual who is subject to a vow of poverty. For this exclusion to apply, the employee must be a member of the religious order and must be performing tasks that are usually required of active members of that order.
• Compensation that is not U.S. source income – Hours of service do not include hours for which an employee receives compensation that is taxed as income from sources outside the United States (generally meaning certain work overseas)."

For more information visit www.irs.gov and view the Affordable Care Act Tax Provisions site for Identifying Full-time Employees, or section 54.4980H-1(a)(24) of the ESRP regulations.

"References to the limited non-assessment period for certain employees refers to the limited period during which an employer will not be subject to an assessable payment under section 4980H(a), and in certain cases section 4980H(b), with respect to an employee as set forth in—

(i) Section 54.4980H–2(b)(5) (regarding the transition rule for an employer’s first year as an applicable large employer),

(ii) Section 54.4980H–3(c)(2) (regarding the application of section 4980H for the three full calendar month period beginning with the first full calendar month in which an employee is first otherwise eligible for an offer of coverage under the monthly measurement method),

(iii) Section 54.4980H–3(d)(2)(iii) (regarding the application of section 4980H during the initial three full calendar months of employment for an employee reasonably expected to be a full-time employee at the start date, under the look-back measurement method),

(iv) Section 54.4980H–3(d)(3)(iii) (regarding the application of section 4980H during the initial measurement period to a new variable hour employee, seasonal employee or part-time employee determined to be employed on average at least 30 hours of service per week, under the look-back measurement method),

(v) Section 54.4980H–3(d)(3)(vii) (regarding the application of section 4980H following an employee’s change in employment status to a full-time employee during the initial measurement period, under the lookback measurement method), and

(vi) Section 54.4980H–4(c) and § 54.4980H–5(c) (regarding the application of section 4980H to the calendar month in which an employee’s start date occurs on a day other than the first day of the calendar month)."

For more information visit www.irs.gov and view the Federal Register Vol. 79, No. 29 Part II from the Department of the Treasury (26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Final Rule).

"The term standard measurement period means a time period of at least three but not more than 12 consecutive months that an applicable large employer member selects and uses in determining whether an ongoing employee is a full-time employee under the look-back measurement method in §54.4980H-3(c). See §54.4980H-3(c)(1)(ii) for rules on payroll periods that include the beginning and end dates of the measurement period."

For more information visit www.irs.gov and view the IRS notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage).

"Specifically, for purposes of section 4980H, an employer is not treated as having offered coverage to an employee unless the coverage is MEC (minimum essential coverage).

"MEC is defined in section 5000A(f) and the regulations under that section. Section 5000A(f)(1)(B) provides that MEC includes coverage under an eligible employer-sponsored plan. Under section 5000A(f)(2) and § 1.5000A–2(c)(1), an eligible employer-sponsored plan is, with respect to any employee, (1) group health insurance coverage offered by, or on behalf of, an employer to the employee that is either (a) a governmental plan within the meaning of section 2791(d)(8) of the Public Health Service Act (PHS Act) (42 U.S.C. 300gg–91(d)(8)), (b) any other plan or coverage offered in the small or large group market within a State, or (c) a grandfathered health plan, as defined in section 5000A(f)(1)(D), offered in a group market, or (2) a self-insured group health plan under which coverage is offered by, or on behalf of, an employer to the employee. Section 5000A(f)(3) and regulations thereunder provide that MEC does not include coverage consisting solely of excepted benefits described in section 2791(c)(1), (c)(2), (c)(3), or (c)(4) of the PHS Act or regulations issued under these provisions. See § 1.5000A–2(g)."

For more information visit www.irs.gov and view the IRS (Final regulations) Federal Register Vol. 79, No. 29 (Shared Responsibility for Employers Regarding Health Coverage).

"Federal Poverty Line Safe Harbor Under the federal poverty line safe harbor, an applicable large employer member’s offer of coverage to an employee is treated as affordable if the employee’s required contribution for the calendar month for the lowest cost self only coverage that provides MV does not exceed 9.5 percent of a monthly amount determined as the federal poverty line for a single individual for the applicable calendar year, divided by 12. This safe harbor is intended to provide employers a predetermined maximum amount of employee contribution that in all cases will result in the coverage being deemed affordable. The proposed regulations provide that, in the interest of administrative convenience, employers may use the most recently published poverty guidelines as of the first day of the plan year of the applicable large employer member’s health plan. One commenter requested that employers be permitted to use the guidelines in effect six months prior to the beginning of the plan year, so as to provide employers with adequate time to establish premium amounts in advance of the plan’s open enrollment period. The final regulations adopt this comment. "

For more information visit www.irs.gov and view the IRS Federal Register Vol. 79, No. 29 (final regulations): Shared Responsibility for Employers Regarding Health Coverage. (Note that while we provide the link to the IRS document on the IRS.gov website, we cannot guarantee that the link will remain valid indefinitely.)

"Under the rate of pay safe harbor in the final regulations, an applicable large employer member’s offer of coverage to an hourly employee is treated as affordable for a calendar month if the employee’s required contribution for the calendar month for the lowest cost self only coverage that provides MV (minimum value) does not exceed 9.5 percent of an amount equal to 130 hours multiplied by the lower of the employee’s hourly rate of pay as of the first day of the coverage period (generally the first day of the plan year) or the employee’s lowest hourly rate of pay during the calendar month.

Under the same safe harbor, an applicable large employer member’s offer of coverage to a non-hourly employee is treated as affordable for a calendar month if the employee’s required contribution for the calendar month for the lowest cost self-only coverage that provides MV does not exceed 9.5 percent of the employee’s monthly salary, as of the first day of the coverage period (instead of 130 multiplied by the hourly rate of pay); provided that if the monthly salary is reduced, including due to a reduction in work hours, the safe harbor is not available.

[...]The rate of pay safe harbor provides employers with a design-based method for satisfying affordability without having to analyze each employee’s wages and hours. [...]The final regulations, unlike the proposed regulations, permit an employer to use the rate of pay safe harbor even if an hourly employee’s hourly rate of pay is reduced during the year.

[...] the rate of pay safe harbor cannot be used, as a practical matter, for tipped employees or for employees who are compensated solely on the basis of commissions. While this is correct, employers can use the two other affordability safe harbors, Form W-2 wages and federal poverty line, for determining affordability for employees whose compensation is not based on a rate of pay."

For more information visit www.irs.gov and view the IRS Federal Register Vol. 79, No. 29 (final regulations): Shared Responsibility for Employers Regarding Health Coverage. (Note that while we provide the link to the IRS document on the IRS.gov website, we cannot guarantee that the link will remain valid indefinitely.)

"Under the Form W–2 wages safe harbor, the employer may calculate the affordability of the coverage based solely on the wages paid to the employee by that employer (and any other member of the same applicable large employer that also pays wages to that employee), as reported in Box 1 of the Form(s) W–2 (‘‘Wage and Tax Statement’’). Consistent with the proposed regulations, the final regulations provide rules for addressing partial years due to the employee beginning or ending employment in the middle of a calendar year. Commenters requested that reductions in Form W–2 wages due to salary reduction elections under a section 401(k) plan or a cafeteria plan under section 125 be disregarded for purposes of the safe harbor. To be consistent with section 36B, under which an employee’s household income (and thus the affordability of an offer of coverage) is determined without adding back those reductions, this suggestion is not adopted in the final regulations under section 4980H.

Commenters also requested that employers be permitted to use the wages from the prior year Form W–2 instead of the current year for purposes of determining affordability. The final regulations do not adopt this comment because it would create a greater disconnect between the premium tax credit and the section 4980H assessable payment. Also, use of prior year wages would not be available with respect to new employees who were not employed by the employer in the prior year. Finally, one commenter requested that employers be permitted to impute full Form W–2 wages during periods of unpaid leave for purposes of applying the safe harbor. The final regulations do not adopt this comment; however, instead of the Form W–2 wages safe harbor, employers can use the rate of pay or federal poverty line safe harbor, both of which use a calculation that is based on an assumed wage amount that is not affected by unpaid leave."

For more information visit www.irs.gov and view the IRS Federal Register Vol. 79, No. 29 (final regulations): Shared Responsibility for Employers Regarding Health Coverage. (Note that while we provide the link to the IRS document on the IRS.gov website, we cannot guarantee that the link will remain valid indefinitely.)

"The Affordable Care Act addresses the meaning of seasonal worker in the context of whether an employer meets the definition of an applicable large employer. Specifically, § 4980H(c)(2)(B) generally provides that if an employer’s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal employees, the employer would not be an applicable large employer. Furthermore, § 4980H(c)(2)(B)(ii) provides that, for this purpose, seasonal worker means a worker who performs labor or services on a seasonal basis, as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR 500.20(s)(1) and retail workers employed exclusively during holiday seasons. The statute does not address how the term “seasonal employee” might be defined for purposes other than the determination of applicable large employer status, such as the determination of whether a new employee of an applicable large employer is reasonably expected to work full time for purposes of determining the amount of any assessable payment under § 4980H. Through at least 2014, employers are permitted to use a reasonable, good faith interpretation of the term “seasonal employee” for purposes of this notice"

For more information visit www.irs.gov and view the IRS Notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage), and Notice 2012-58 (Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage).

"The term stability period means a time period selected by an applicable large employer member that follows, and is associated with, a standard measurement period or an initial measurement period, and is used by the applicable large employer member as part of the process of determining whether an employee is a full-time employee under the look-back measurement method in section 54.4980H-3(c)."

For more information visit www.irs.gov and view the IRS notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage).

"A new employee is a variable hour employee if, based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week. A new employee who is expected to work initially at least 30 hours per week may be a variable hour employee if, based on the facts and circumstances at the start date, the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week over the initial measurement period. As one example, a variable hour employee would include a retail worker hired at more than 30 hours per week for the holiday season who is reasonably expected to continue working after the holiday season but is not reasonably expected to work at least 30 hours per week for the portion of the initial measurement period remaining after the holiday season, so that it cannot be determined at the start date that the employee is reasonably expected to average at least 30 hours per week during the initial measurement period."

For more information visit www.irs.gov and view the IRS Notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage), and Notice 2012-58 (Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage).

" An employer could use an initial measurement period, in combination with any administrative period, that did not extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee’s start date."

For more information visit www.irs.gov and view the IRS Notice 4830-01-p (Shared Responsibility for Employers Regarding Health Coverage), and Notice 2012-58 (Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage).