One of the trickiest parts of achieving compliance with Affordable Care Act (ACA) reporting requirements involves administering payments in situations of disability claims—both short-term disability (STD) and long-term disability (LTD). As with other aspects of compliance, the rules that govern for those receiving STD/LTD payments can be very complex.
Determining Full-Time Status
Per the ACA, an Applicable Large Employer (ALE), must offer affordable minimum value healthcare plans to its full-time employees or risk getting penalized by the IRS. A “full-time” employee is one whose working hours average out to 30 hours in a week, or 130 hours in a month. It should be noted, however, that there are regulations that come into play when determining an employee’s full-time status; specifically, the exact method that companies use to determine full-time status will have an effect on how much coverage they must offer.
If a company calculates an employee’s full-time status based on the amount of hours they work in a month, they are said to use the “monthly measurement” method; conversely, if they determine this status by looking back at the employee’s average number of hours worked in a measurement period, the company is using what’s known as the “look back” method.
How Disability Claim Payments Affect Full-Time Status Eligibility
Disability claim payments affect both companies using the “monthly measurement” and “look back” methods for determining full-time employment status.
For organizations using monthly measurement, employees receive credit for hours worked, pursuant to the exact arrangement of their disability payments. Here’s an example to illustrate what monthly measurement could look like:
Jessica is an employee who worked 37 hours each of the first two weeks of January and received STD payments resulting in 37 hours of credited service for each of the second two weeks of January. Using the monthly measurement period, the company must offer Jessica health care coverage for January because she was paid for at least 130 hours of work.
Companies that use the “look back” method face a much simpler process over the monthly because there’s more time to analyze the data. An employee’s full-time status as determined during the measurement period (i.e. when companies assess employee full-time eligibility) remains valid during the “stability” period; accordingly, if an employee receives disability claim payments during the measurement period, those must be considered in determining full-time eligibility.
For the purposes of ACA compliance, disability claim payments should be considered as payments given to employees for being in the office and doing their jobs, even though that’s not necessarily the case. If an employee is eligible to be considered a full-time employee between actual hours worked and credits from disability claim payments, they must be offered a health care plan by their employing organization in accordance with the employer shared responsibility rules.
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The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information.
