IRS and PPACA: What's a full-time employee?News added by National Underwriter on September 5, 2012
National Underwriter

National Underwriter

Joined: April 22, 2011

By Allison Bell

Employers can take up to 12 months to determine whether workers are full-time employees for purposes of applying the new federal "play or pay" health benefits rules.

Employers also will be able to use a worker's Form W-2 wages to determine whether the health coverage offered to a worker was affordable at least until the end of 2014.

The Internal Revenue Service (IRS) has included those assurances in IRS Notice 2012-58, a batch of guidance officials developed to help employers apply the Patient Protection and Affordable Care Act (PPACA) play-or-pay provisions.

The play-or-pay provisions, also known as the "employer shared responsibility" provisions, will require employers with 50 or more full-time employees to provide what PPACA and regulators define as being "affordable health coverage" or else pay a penalty.

Supporters of play-or-pay rules argue that they keep employers from skimping on health coverage in an effort to undercut competitors that do offer health benefits.

Some types of employers, such as restaurants and temporary help firms, have argued that imposing any play-or-pay requirements on their businesses would jack up their costs, saddle them with massive new administrative burdens, and force them to cut back on the number of people they employ.

Others have argued that poorly designed regulations could make the play-or-pay provisions more burdensome than they would otherwise be or force employers to pry into workers' personal affairs.

Employer groups and insurance groups have suggested that some proposed play-or-pay interpretations could force employers to shift workers from one type of plan to another completely different type of plan every month.

The IRS has proposed several different methods that employers could use to classify workers and stabilize their benefits over the past few years.

In the Notice 2012-58, IRS officials create a "standard "measurement period" and an "initial measurement period" of 3 months to 12 months. An employer could use the hours worked during the measurement period to classify employees.

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