FAQ: Measurement and Stability Periods for New Hires and Rehires as Required by the Federal Patient Protection and Affordable Care Act

FAQ: Measurement and Stability Periods for New Hires and Rehires as Required by the Federal Patient Protection and Affordable Care Act https://wahospitality.org/wp-content/uploads/2011/11/healthcare273a.jpg

Employers subject to the employer responsibility provision in the federal Patient Protection and Affordable Care Act who would like to take advantage of federal safe harbor provisions must establish measurement and stability periods to determine whether variable hour employees must be offered health care coverage.   In instances where employers hire new variable hour employees or rehire former employees that will work variable schedules at a time that does not coincide with the employer’s measurement period for current employees, separate measurement and stability periods must be established for the new hires.   If a new variable hour employee is found eligible for coverage after the measurement period, the employer has 90 days to enroll the employee in coverage.
The following are frequently asked questions regarding this issue:

At what point do I start measuring the hours of new variable hour employees to determine whether they are eligible for health care coverage? 

In most situations you will begin tracking the hours of new variable hour employees in the month they are hired.  If you hire a new variable hour employee after the measurement period for your existing employees has already begun, you will need to establish a separate measurement and stability period for the new employee.  The measurement period must be equal in duration to that of existing employees – if you have a six-month measurement period for existing employees, then new employees must have a six-month measurement period, etc.

However, if the measurement period for your existing employees has not yet started for the year (ie, you are using a 6- or 9-month measurement period instead of a 12-month period), you may include the employee in the upcoming measurement period with all other employees.

The measurement period for my current employees runs January – September, but my primary hiring season is in May.  Do I just incorporate the new hires for the remainder of the measurement period, June – September?

No.  The measurement period for new variable hour employees must be the same duration as existing employees. In this situation, a nine-month measurement period is used for existing employees and therefore must be used for new variable hour employees as well.  In this situation, a separate measurement period must be established for the new employees and would run May-January.

What if a new variable hour employee is found eligible for health care coverage after my plan’s open enrollment period has ended? 

The employee is treated as a new employee and is allowed to enroll in the plan once they are eligible.  The employee must be offered an open enrollment or administrative period to consider their options and determine their ability to contribute to the plan but must be offered coverage and the opportunity to enroll within 90 days of the end of the measurement period.

If new variable hour employees are on a different measurement period, are they on a different stability period as well?

Potentially.  The stability period must be the same duration for new variable hour employees as it is for existing employees.  However, depending on when they were hired and when the new hires measurement period ended, the specific months of coverage may be different during the first year of coverage.

Are new variable hour employees kept on these separate measurement and stability periods throughout their employment?  

No.  If after the end of the initial measurement period, the new employee is not eligible for coverage, the employee transitions to the measurement period for existing employees.  If the new variable hour employee is eligible for coverage, they must be offered the opportunity to enroll, and once their stability period begins, they can be transitioned into the measurement and stability periods of existing employees.

What if I hire a new variable hour employee and recognize quickly that the number of hours they are working will qualify them for coverage.  Must they complete the established measurement period or can I just offer them coverage during the upcoming open enrollment period?

You may always offer a new variable hour employee the opportunity to enroll in coverage prior to the end of the established measurement period.  This may be a prudent way to avoid establishing multiple measurement and stability periods.  However, if you end-up offering a new variable hour employee coverage too early, you may ultimately pay more in premium contributions than may have been necessary.

When must rehires be offered coverage?

If you rehire a former full-time employee to work full-time, they must be offered coverage within 90 days of hire.  However, if you rehire a former full-time employee to work variable hours, the situation becomes a bit more complicated.  If the rehire occurs within 26 weeks of the separation date, you must offer this employee the opportunity to enroll in coverage within 90 days of hire.  But since this employee is now working a variable hour shift instead of full-time, you will also start them on a new employee measurement period that will start the month they are rehired.   They must be offered coverage for the remainder of your standard plan year, but if the measurement period has not been satisfied by the time open enrollment ends for the upcoming plan year, you are not required to extend their coverage at the beginning of the new plan year.  You may continue to monitor their hours under the new employee measurement period and at that point if they are found eligible, then they must be offered an opportunity to reenroll.  This employee will then cycle onto the measurement and stability periods of existing employees for the remainder of their employment.

Donna Steward, President, Kiawe Public Affairs

This publication is intended to inform employers about provisions of the Patient Protection and Affordable Care Act and how those provisions may affect them.  This information should not be construed as legal or tax advice, and readers should not act upon the information contained therein without professional counsel.

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