When does a substitute teacher become FTE? Sometimes, too late for coverage under ACA
On Board Online • June 10, 2013
Avoiding denying health coverage to substitute teachers who achieve full-time status will be a challenge for school districts under the Affordable Care Act (ACA). The law calls for employers to consider the number of hours worked on a month-by-month basis, but a district may not know until a month is over which substitutes are full-time. And by then it is too late to offer coverage.
The ACA defines full-time employees as those who average at least 30 hours of service per week (or generally 130 hours of service in a month).
Districts can avoid the possibility of needing to provide health care coverage for substitutes if they ensure that no substitute has more than 130 hours of service per month. But educational needs may require otherwise. In that case, districts should track the number of hours worked by each substitute and follow IRS regulations on what the law calls “variable hour” employees.
A variable hour employee is defined under the regulations as an employee for whom, on the date of hire, the employer cannot reasonably determine the number of hours of service an employee is expected to be employed.
For variable hour employees, districts should take advantage of a safe harbor measurement/stability period described in the IRS regulations. Under the safe harbor, an employer may use a system of looking back to determine if a variable hour employee should be classified as full-time. This system includes three periods of time, a standard measurement period, an optional administrative period and a stability period.
Under this safe harbor, an employer would first establish a measurement period between three and 12 months. The employer would track the hours of service for an employee during this measurement period. The employer then can choose to have an administrative period of up to 90 days to determine if the employee averaged 30 hours a week (or 130 hours of service per month) during the measurement period, and if so, take the steps necessary for providing coverage during the stability period. If, during the measurement period, the employee averaged at least 30 hours of service a week (or 130 hours of service per month), then the employee would be treated as a full-time employee during a stability period regardless of the number of hours of service during the stability period. The stability period would last the longer of the length of the measurement period, or six months.
For newly hired variable hour employees the process will be similar, but rather than looking back at the past service, the measurement period is prospective. The district would establish an initial measurement period, followed by an administrative period (total cannot exceed 13 months) and a stability period.
Continuing employee or new hire?
Substitutes, especially the good ones, may be hired several different times in a month. They may also be hired for a lengthy period of regular employment (i.e., a long-term substitute) followed by a period of intermittent substitute service. When should a district reset the measurement or stability period, and when should it include the unemployed time into the hours of service calculation?
The answer is to measure the length of the break between the termination and rehire dates. If the break is long enough, then the district should treat the substitute as a rehire and restart the initial measurement period. If not long enough, then the district should continue the prior measurement or stability period. If the break in service is at least 26 weeks or meets the requirements of the Rule of Parity (is the longer of the length of the prior employment or 4 weeks), then the break in service is “long enough” for the district to treat the substitute as a new hire.
– Dina L. Allen, John J. Christopher and Michael J. Flanagan, Hodgson Russ, LLP
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