The Definition of Full-Time Employee Under PPACA: A Departure From the Norm

By Kristi R. Gauthier, Esq.
Clark Hill PLC

March 2013 – The Patient Protection and Affordable Care Act (PPACA) has had a significant impact on the way in which employers and plan sponsors will administer their health plans. One of the more hotly debated issues involves the definition of “full-time employee” for purposes of PPACA. This definition directly impacts several important PPACA provisions, including the determination of applicable large employer status, employer shared responsibility penalty determinations and calculations and future automatic enrollment provisions.

Under PPACA, a “full-time employee” is defined as an employee who was employed on average at least 30 hours of service per week (or the monthly equivalent of 130 hours of service in a calendar month). This is a departure from what many employers have historically considered to be full-time, which was typically 36-40 hours per week. Despite a high volume of public concern and comment from the employer and plan sponsor community, the recently released proposed regulations relating to the employer shared responsibility provisions clarified that the Agencies opted to retain the 30 hours per week threshold.

An important item to note is that the most recent guidance clarified that the definition has changed from 30 or more hours worked per week (as was indicated in previous guidance) to 30 or more hours of service per week (or 130 hours of service per month). When determining an employee’s hours of service an employer must consider not only hours when work is performed, but also hours for which an employee is paid or entitled to payment even when no work is performed (vacation, holiday, illness, incapacity/disability, layoff, jury duty, military duty or leave of absence). The general rule is that all periods of paid leave must be counted (and not unpaid leaves). However, the proposed regulations also provide that periods of “special unpaid leave” must be counted towards hours of service. “Special unpaid leaves” refers to leaves of absence under the Family and Medical Leave Act of 1993 (FMLA), as amended, and the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), as well as any unpaid leave on account of jury duty.

While the definition of full-time employee is uniform for all employer shared responsibility provision purposes under PPACA, the way in which an employer is permitted to count/measure the number of full-time employees differs for purposes of determining applicable large employer status and for purposes of employer shared responsibility penalty calculations.  The determination of who is a full-time employee for purposes of the employer shared responsibility provisions involves complex rules and analysis.  Therefore, employers should carefully review their workforce to determine which employees may be considered to be full-time for purposes of PPACA and work closely with their benefits consultants and legal counsel in order to be prepared for the fast approaching 2014 effective date.

*This article is not intended to give legal advice. It is comprised of general information. Employers facing specific issues should seek the assistance of legal counsel.

Kristi R. Gauthier is a senior attorney in Clark Hill’s Birmingham office and concentrates her practice in Employee Benefits Law. Kristi has represented clients in a wide variety of employee benefits issues involving health and welfare benefits, as well as retirement plans. Kristi is admitted to practice in the State of Michigan, the U.S. District Court for the Eastern District of Michigan, and the U.S. Sixth Circuit Court of Appeals. She also is active in the legal community with memberships in the American Bar Association, the State Bar of Michigan, and the Oakland County Bar Association where she is a member of the Employee Benefits Committee. Kristi also serves as a member of the Clark Hill Diversity and Inclusion Committee. Kristi has lectured on various employee benefits issues, including ERISA compliance, healthcare reform, COBRA, section 125 plans, 403(b) plans and IRS plan correction programs. Kristi is also a co-author of the ABA publication ERISA Survey of Federal Circuits. Kristi was named a “Rising Star” by Michigan Super Lawyers in 2011.