Baldwin Bulletin FAQ of the Month

July’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 change 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 an FT employee transfers to a PT 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 full 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 Part B penalty if the employee obtains subsidized marketplace coverage. The Part B penalty is $417.50/month for 2026 and $472.50/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.

May’s FAQ of the month

Question:

What is Imputed Income and how does it apply to health and welfare plans?

Answer:

Imputed income is the value of any non-cash benefit or income an employee receives which is excludable from wages. When an employee receives non-taxable benefits, they are taxed on the fair market value of those benefits, even though they don’t pay for them.

Respecting health and welfare benefit plans, imputed income arises when an employee adds a domestic or civil union partner, or the child of a domestic or civil union partner, to their coverage under an employer sponsored health plan. Under Internal Revenue Code Section 105(b) a dependent includes those individuals who qualify as an employee’s Federal tax dependents; however, domestic and civil union partners, as well as their children, do not qualify as an employee’s federal tax dependent.

Domestic and civil union partners, as well as other non-qualifying tax dependents, cannot make pre-tax premium contributions, and employer contributions must be imputed and reported as income respecting the underlying employee.

The IRS has not provided a definition for imputed income; however, IRS Private Letters and other sub-regulatory guidance explain that reportable imputed income must represent a reasonable approximation of the value of such coverage received by the dependent.

Action:

Ensure plan documents clearly outline requirements for adding a domestic or civil union partner, or the child of same. Work with Tax professionals to ensure appropriate taxes are being withheld and reported.

Details:

For more information, contact the Baldwin Regulatory Compliance Collaborative.

March’s FAQ of the month

Question:

Is an employer required to offer ACA-qualifying minimum essential coverage for the benefit of its student interns?

Answer:

ACA provisions permit an employer to forego an offer of minimum essential coverage in the instance of a bona fide academic intern. 

An “academic intern” is defined as an individual is who is currently enrolled, and receiving academic credit, in a course of study. Furthermore, such individual must be either: 

1. Receiving academic credit in exchange for the employment services provided to the employer; or, 
2. Receiving federal or state work study grant dollars in exchange for the employment services provided to the employer. 

A bona fide academic intern is distinguishable from a student worker, in that, in the instance of a student worker, the employer MAY NOT forego an offer of ACA-qualifying minimum essential coverage in the instance of a full-time student worker. 

A “student worker” is an individual who, while employed by an employer, is also enrolled in an academic course of studies; however, this individual is not receiving academic credit or federal or state work study grant dollars in connection with the employment services provided to such employer. 

Action:

Employers should assess all interns to distinguish between student workers and bona fide academic interns, assuring that they make ACA-qualifying offers of minimum essential coverage to their full-time student workers.

Further, employers should maintain adequate documentation and records demonstrating their treatment of bona fide academic interns for coverage purposes.

Details:

For more information, contact the Baldwin Regulatory Compliance Collaborative.

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.