The Affordable Care Act (ACA), also known as Obamacare, includes employer shared responsibility provisions that require certain employers to offer health coverage to their full-time employees. Understanding who qualifies as a full-time employee under the ACA is crucial for businesses, especially those employing part-time workers. This article clarifies the definition of a full-time employee according to ACA guidelines and how it impacts employers and part-time staff.
For the purpose of employer shared responsibility under the ACA, a full-time employee is defined as someone who is employed for an average of at least 30 hours of service per week, or 130 hours of service per month. This definition is critical for employers to determine their obligations under the ACA and ensure compliance.
A diverse group of part-time workers in a modern office setting, collaborating and engaged in their tasks, highlighting the importance of understanding ACA for various employment scenarios.
To determine whether an employee meets this full-time threshold, employers can use one of two methods: the monthly measurement method and the look-back measurement method.
Methods for Determining Full-Time Employee Status
There are two primary methods employers can use to determine full-time employee status under the ACA:
Monthly Measurement Method
The monthly measurement method is straightforward. Employers assess employee hours on a month-by-month basis. If an employee works at least 130 hours of service in a given calendar month, they are considered a full-time employee for that month. This method provides a simple, direct way to track full-time status each month.
Look-Back Measurement Method
The look-back measurement method offers a more stable approach, particularly for employers with variable hour employees. This method allows employers to look back at a defined measurement period to determine an employee’s status for a future stability period. If an employee averages at least 30 hours per week (or 130 hours per month) during the measurement period, they are classified as a full-time employee during the subsequent stability period, regardless of their hours worked each month during the stability period. It’s important to note that while the look-back method can determine full-time status for offering health coverage, it cannot be used to determine if an employer is considered an Applicable Large Employer (ALE).
For detailed regulations on these methods, you can refer to section 54.4980H-3 of the ESRP regulations.
What Counts as an Hour of Service?
Understanding what constitutes an “hour of service” is essential for accurate employee classification. Under ACA rules, an hour of service includes:
- Hours worked: Each hour an employee is paid, or entitled to payment, for performing their duties.
- Paid leave: Hours for which an employee is paid or entitled to payment for periods when no work is performed due to vacation, holiday, illness, disability, layoff, jury duty, military duty, or leave of absence.
However, certain categories of service are excluded from the definition of “hour of service”. These exclusions are specific and should be carefully considered:
- Volunteer work: Bona fide volunteer service for government entities or tax-exempt organizations.
- Federal Work-Study: Hours worked by students under the federal work-study program or similar state programs.
- Religious Orders: Under specific conditions, work performed by members of religious orders who have taken a vow of poverty.
- Non-U.S. Income: Compensation for work taxed as income from sources outside the United States.
For more comprehensive details on these exclusions, consult the ESRP regulations and our Questions and Answers page.
Hours of Service for Specific Employee Categories
Determining hours of service can be complex for certain employee categories with non-traditional work arrangements. The ACA provides guidance for these situations, requiring employers to use a reasonable method of crediting hours. Categories with specific considerations include:
- Adjunct Faculty: Methods for calculating hours for part-time faculty who may have varying workloads.
- Airline Industry Employees: Handling layover hours and other unique aspects of airline employee schedules.
- On-Call Employees: Determining hours for employees who are required to be available but may not be actively working.
Guidance for these categories is available in Q&A #23 of our Questions and Answers page and section VI.C of the ESRP regulations.
Conclusion
Accurately classifying employees as full-time or part-time under the Affordable Care Act is essential for employer compliance with shared responsibility provisions. By understanding the 30-hour rule, the measurement methods, and what constitutes an hour of service, employers can effectively navigate ACA requirements and ensure they are providing appropriate health coverage options to their workforce, including those considered part-time workers who may meet the full-time threshold under the ACA. For further information, refer to our Questions and Answers section and the official resources provided by the IRS and Department of Treasury.
