MarchReport-toFlip - page 11

other than non-payment.
The key issue for that employer,
therefore, is whether an employee is
considered a full-time employee during
the leave. This determination will depend
upon the type of leave involved and
whether the employer is using the look-
back method or monthly measurement
method to identify full-time employees.
Look-Back Method
. If an employer is
using the look-back method, and if an
employee has been employed for a full
“measurement period,” the employee’s
status as a full-time or part-time em-
ployee will remain the same for the
full “stability period,” even if he or she
takes a leave of absence. For example, an
employee works an average of at least 30
hours per week during the employer’s
measurement period and is therefore
considered a full-time employee for all
of 2016. That employee’s leave of absence
in 2016 does not change the employee’s
status as a full-time employee in 2016, re-
gardless of the reason for or length of the
absence. However, if the employee has
not yet been employed for a full measure-
ment period, the monthly measurement
method rules apply.
Monthly Measurement Method
. If an
employer is using the monthly mea-
surement method, an employee will be
considered a full-time employee for any
month for which he is credited with an
average of at least 30 hours of service. An
employee generally is credited with hours
of service under this method only for
hours worked and for paid leave. For ex-
ample, a full-time employee takes a paid
leave of absence from Nov. 1 through
Dec. 31. Because the employee’s absence
is paid, the employee continues to be
credited with hours of service during
the leave and continues to be a full-time
employee. If the leave were unpaid, the
employee would be credited with zero
hours of service for November and
December and therefore would not be a
full-time employee for those months.
Impact of 2016 Changes
In 2015, application of the A penalty
versus the B penalty depended upon
whether the employer offered health
coverage to at least 70% (not 95%) of its
full-time employees and their children.
Because the offer threshold was so low,
many employers felt comfortable choos-
ing to terminate coverage for employees
on leave. These employers believed that
they offered health coverage to enough
full-time employees, so they would be
subject only to the B penalty — and only
if the employee on leave actually ob-
tained a subsidized marketplace policy.
Because the threshold is now 95%,
employers will need to carefully confirm
whether termination of an employee’s
health coverage during a leave could
cause the employer to move from the B
penalty to the A penalty. In the example
above, Company A’s termination of
health coverage for a full-time employee
on leave in November and December
caused the potential penalty to be almost
50 times more expensive than it other-
wise would have been — regardless of
whether the employee on leave obtained
a subsidized marketplace policy. Employ-
ers should understand the ACA rules and
carefully consider whether their leave
practices should be changed to avoid a
significant increase in risk.
Wilcoxon is a partner inThompson Hine LLP’s
Employee Benefits and Executive Compensation
Group and advises employers on the legal requirements
applicable to group health plans.
Your clients trust you to provide guidance
based on their unique situation.
At
First Financial
, we believe our clients
deserve the same personalized service
when it comes to managing their finances.
That’s why we are committed to offering a
full complement of banking solutions for
you, your business and your future.
Contact our Cincinnati team today:
Paul Silva
Market President
513.979.5878
BankatFirst.com
Client focused.
Success driven.
March 2016 CBA REPORT
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