We recently responded to some of the questions we have received from employers regarding the look-back rules that apply to certain new variable employees under Notice 2012-58 (see “SECOND OPINIONS: Full-Time Employee and Waiting Period Guidance – Part I”). In this installment and our next installment, we respond to other questions we have received from employers regarding these IRS notices, including questions about the look-back rules that apply to “ongoing” employees.
What is the safe harbor look-back method that may be used to determine the full-time status of ongoing employees?
For ongoing employees, an employer may generally determine full-time status by looking back over a “standard measurement period” of between 3 to 12 consecutive months. Ongoing employees are employees who have been employed at least one standard measurement period.
For an employee who worked on a full-time basis during the standard measurement period, the employer must treat the employee as a full-time employee during a “stability period” of 6 to 12 consecutive months (but which cannot be shorter than the standard measurement period), regardless of the employee’s actual hours during the stability period, so long as he or she remains an employee. For an employee who did not work on a full-time basis during the standard measurement period, the employer may treat the employee as not a full-time employee during a stability period that is not longer than the standard measurement period.
An employer has the flexibility to determine the months in which the standard measurement period starts and ends, so long as the determination is made on a uniform and consistent basis for all employees “in the same category.” In general, employers may use measurement periods and stability periods that differ in length or in starting or ending dates for the following categories of employees:
- collectively bargained vs. non-collectively bargained employees;
- salaried vs. hourly employees;
- employees of different entities; and
- employees located in different states.
Notice 2012-58 states that different rules may apply to employees who “move into” full-time status during the year, and that upcoming regulations will likely provide additional rules regarding employees who experience a change in employment status.
May employers use an administrative period between the look-back period and stability period?
Yes, Notice 2012-58 permits employers to use an "administrative period" of up to 90 days between the standard measurement period and the associated stability period to identify full-time employees, notify them of their eligibility for coverage, and enroll those who elect coverage. This administrative period must overlap with the prior stability period to prevent any gaps in coverage.
For what period of time may employers rely on these two new notices?
Notices 2012-58 and 2012-59 may be relied upon at least through the end of 2014.
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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.