January’s FAQ of the month
Question:
Is an Applicable Large Employer (ALE) required to continue to offer medical coverage to an employee that transfers from full-time (FT) to part-time (PT) status if they are in a stability period when the reclassification occurs?
Answer:
Yes, it is possible to shorten the stability period and to change to a monthly measurement for the employee in limited circumstances. If a full-time employee transfers to a part-time position and meets specific conditions, the ALE can switch to the monthly measurement method starting with the fourth month after the transfer, provided the employee averages less than 30 hours per week during the first three months following the change.
There must be a bona fide change of position, and the ALE must have continuously offered minimum value coverage to the employee from their start date through the calendar month of the employment status change. Typically, either change will result in a loss of eligibility under the medical plan and COBRA will be triggered. Since COBRA is an offer of coverage, the penalty risk for the employer is limited to the months of the probationary period (or the remainder of the stability period if the special rule cannot be used).
The employer may be subject to a Section 4980H Part B penalty if the employee obtains subsidized marketplace coverage. The Part B penalty is $362.50/month for 2025 and $417.50/month for 2026.
Action:
Determine whether the employment change was a change of position or simply a reduction in hours. If there is a change in position, monitor the employee’s hours each month for the remainder of the stability period. Also, remember to properly classify the employee for reporting purposes.
Details:
For more information contact the Baldwin Regulatory Compliance Collaborative.
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