Easing into the Employer Shared Responsibility Provisions through Safe Harbors

Under the Affordable Care Act (ACA), a large employer is subject to penalties if they fail to offer health insurance to their full time employees.  Even large employers that offer coverage may be subject to penalties if the coverage isn’t affordable or does not provide minimum value.  Learn more about the employer shared responsibility provision.

Employers can ease into the mandate through safe harbors, which relate to specific time periods in which employers can determine an employee’s full-time status, without facing a penalty.   Safe harbors are generally used by companies with a large number of part-time or seasonal employees.

Under the safe harbor method, an employer determines an employee’s full-time status by defining a standard measurement period lasting 3-12 months and then calculating the number of hours an employee worked during this time.   Any employee determined to have full-time status (more than 30 hours/week) needs to be enrolled in an employer-sponsored plan.   This enrollment can be done during the optional administrative period that immediately follows the measurement period and lasts up to 90 days.

If an employee is determined to have full-time status during the measurement period, then the employee enters a stability period in which the employer is required to provide that employee with health care coverage for at least as long as the measurement period.

As an example, ABC Company enters employee A into a measurement period for 6 months and determines that employee A worked enough hours to be considered a full-time employee under the Affordable Care Act.  ABC Company has 90 days to enroll employee A into an employer sponsored healthcare plan, or risk paying a penalty.  ABC Company must also provide health coverage for employee A for at least 6 months, even if employee A’s hours are reduced to part-time (less than 30 hours/week).  If ABC Company used a 3 month measurement period, then they would need to provide health coverage for eligible full time employees for at least 3 months.

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