TOPIC: ACA REPORTING/EMPLOYEE CLASSIFICATION
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 a 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 $371.67/month for 2024 and $362.50/month for 2025.
Action:
Determine whether the employment change was a change of position or simply a reduction in hours. If 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.
| Topic | Details | Example |
|---|---|---|
| Bona Fide Change in Position | If an employee transfers to a part-time position and meets specific conditions, the employer can switch to the monthly measurement method for the remainder of the stability period starting the 4th month after the transfer, provided the employee averages less than 30 hours per week during the first full three months following the transfer. | Example A: An employee hired full-time in 2022 transfers to a part-time position on May 15, 2024, resulting in coverage termination (for carrier eligibility reasons) and there is an offer of COBRA. The employee is treated as full-time for ACA purposes through August 2024 and part-time thereafter if hours remained below 30 hours per week for June, July and August. |
| Reduction in Hours without Position Change | If an employee’s hours are reduced without a bona fide position change, the special rule cannot be used, and coverage must be offered for the remainder of the stability period. COBRA would be considered an offer of coverage under ACA rules. | Example B: An employee’s hours are reduced in May 2024, resulting in a loss of eligibility under the plan and COBRA is offered. The employee remains classified as full-time for ACA purposes through December 2024 since the exception for a bona fide change in position does not apply. |
| Penalty Risk and Affordability | 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) if COBRA is not affordable. This occurs when the employee is no longer eligible under the written plan document and COBRA is offered. The employer is only subject to the Part B penalty if the employee obtains marketplace coverage with a subsidy. This assumes that the employer offers minimum essential coverage to at least 95% of its FT employees. | Example A: $371.67/month for June, July and August but only if the employee obtains subsidized marketplace coverage. Example B: $371.67/month for June through December (assuming a calendar year stability period), but only if the employee obtains subsidized marketplace coverage. |
For more information
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