As labor shortages affect organizations across all industries, recruiters are turning to former employees as a lucrative talent pool. However, navigating Affordable Care Act (ACA) reporting compliance when it comes to rehires, or “boomerang” employees, presents a unique challenge for HR professionals. Hiring boomerang employees has become increasingly common over the past few years, and the trend is only growing.
A 2023 Harvard Business Review report shows 28% of new hires in a multi-year study were boomerang hires who had resigned within the previous 36 months. HR professionals will need to learn the ins and outs of ACA reporting requirements for boomerangs to avoid expensive penalties.
What you need to know about ACA rules for rehires
The answer to how an employee’s health coverage should be handled upon returning depends on how they are treated under ACA break in service rules. The distinction between a “rehire” and “new hire” determines whether an employee will need to be offered benefits right away or if the designated waiting period applies. It’s important that you understand break in service rules to decide which category fits your boomerang employee. The content outlined here is assuming the use of the Look-Back Measurement Method.
Rehire scenarios
Below are the three common scenarios that can apply to boomerang employees:
- Rehire after a break in service of 13 weeks or more (26 weeks for educational entities): the employee can be labeled a “new hire” and, if the employee is variable hour worker or part time, employers can wait until the end of the designated measurement period to begin offering coverage. If the employee is hired full time, then the same rules for other newly hired full time employees would apply.
- Rehire after a break in service of less than 13 weeks (26 weeks for educational entities): the individual is treated as a continuing employee and must be offered coverage immediately on the first date of reemployment.
- There is an exception to this rule. The ACA’s Rule of Parity applies to a rehire if their employment gap was longer than the period they worked before leaving. In this case, they would be treated as a new hire.
- Note: If the returning employee was eligible before the break-in-service, but opted not to receive coverage, then the employer may not have an obligation to offer new coverage upon rehire, according to Cafeteria Plan regulations.
- If the rehire was in a stability period before leaving, then they should be offered benefits upon reemployment as they have been placed back into the ongoing eligible stability period.
ACA compliance for boomerangs is a start
ACA compliance is one key consideration when it comes to hiring boomerang employees. Another large task is establishing a strong framework for recruiting, onboarding, and training so rehires are successfully reintegrated into your company from day one.
Why you should invest with an ACA vendor
Your HR team is already juggling multiple priorities and complying with ACA rules is no easy task. ACA reporting can steal away several hours each month, not to mention the rush to meet deadlines at the start of each year to review 1095-C forms before they’re sent out and filed.
Crucial data used for reporting is often spread out across many systems with no central location to find employee eligibility information. When data is pulled from varied sources, it can become disordered, unreliable, or incomplete. Accurate reporting is key to staying on top of ACA compliance.
Delegating more of the time-consuming ACA reporting administrative duties to a vendor can save you time and headaches while reducing the chance your company will be on the hook for expensive penalties. An effective ACA support solution will provide alerts when you need to offer health care coverage to a boomerang employee.
Benefitfocus Can Help
The Benefitfocus® ACA Compliance Solution takes the heavy lifting off your HR team by outsourcing ACA reporting while achieving a high standard of accuracy with our robust software. We go beyond equipping our customers with software; we manage ACA compliance for them.
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.
