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A “look-back” period that could greatly reduce the amount of penalties owed by staffing firms under the Affordable Care Act was included in proposed regulations released late Friday by the federal government. The proposed regulations aren’t yet final, but they provide further clarification than the guidance previously issued on the look-back period.
The IRS had already issued guidance that a 12-month look-back period would be in place through 2014. However, Friday's update indicates the federal government plans to include the 12-month look-back in regulations going forward past 2014.
The look-back period provides a safe harbor for determining which newly hired “variable hour” workers are full-time and, therefore, eligible to be counted when calculating penalties.
Companies that don’t offer health insurance to their employees, or offer insurance that doesn’t meet certain qualifications, can face an annual penalty of up to $2,000 multiplied by all of their full-time workers.
The look-back involves a measurement period that can last between three and 12 months. A worker must work the full length of the look-back period at 30 hours a week (the full-time threshold) in order to be considered a full-time worker and subject to possible penalties.
If the worker is found to be working full-time during the look-back period, the worker will be considered full-time for a following “stability period” regardless of whether his or her hours dip below the 30-hour per week threshold. On the other hand, workers found to be part-time during the measurement period will be considered part-time and not eligible to be counted when penalties are assessed, even if their hours increase past the 30-hour per week threshold. The stability period would last the same length as the measurement period but would not be less than six months long. After an initial look-back period, the employee would transition to a similar look-back period for ongoing employees.
Variable hour employees are workers who are expected to work full time for a limited duration or whose hours cannot be determined in advance to be full-time or part time.
The proposed regulations also discuss workers that are expected to work full-time. The proposed regulations allow for a three-month administrative period before that worker must be offered health insurance.
The proposed regulations also state that many staffing firm workers will be variable-hour employees, but they stopped short of allowing all staffing firm employees to be labeled as variable-hour employees.
“We do not anticipate that all employees of a temporary staffing agency are inherently variable hour employees (especially employees on longer-term assignment with predictable requests for hours of service, as may be the case, for example, with particularly high-skilled technical or professional workers),” according to the proposed regulations.
It also cautioned against companies using staffing firms to get around the law.
In addition, the proposed regulations called for more comment on temporary staffing firms and the law and what safe harbors could exist for staffing firms.
A public hearing on the proposed regulations is set for April 23 with a deadline for written comments on March 18.
For a story on comments on the proposed regulations by George Reardon, special counsel with employment law firm Littler Mendelson, click here.
To view the proposed regulations, click here.