ACA’s employer mandate poses unique issues for higher education

Background

Pursuant to the Affordable Care Act (ACA) enacted in 2010, some employers (defined by the ACA as ‘applicable large employers’) are required to provide to their full-time employees affordable health insurance coverage that covers various basic benefits (these basic benefits, in ACA parlance, are referred to as ‘minimum essential coverage’). Failure to offer this type of health insurance coverage results in a penalty to the employer. Applicable large employers are those employers with 50 or more full-time employees. For this purpose, an employer is required also to take into account those employees whose average weekly hours of service is 30 or more (full-time equivalent). For higher education employers, adjunct faculty and student workers will be part of the full-time equivalent employee analysis.

Recognizing that the task of determining whether a full-time equivalent exists is onerous, Treasury and the IRS, in the final Regulations, provide some guidance employers can use to determine the full-time equivalent status of some of its workers. Included in this special class are employers of adjunct faculty. As a result of Treasury and IRS apparent sensitivity to the difficulty of determining full-time equivalents, the issuance of final rules has been reserved until more consideration has been given to the issue. Thus, the safe harbor methods described in the preamble represent only temporary guidance that can be relied upon until at least the end of 2015.

Crediting hours of service guidance

Adjunct employees

A full-time equivalent worker is an employee whose average weekly hours of service to the employer are 30 or more. For certain employers, such as those with adjunct faculty, the current guidance requires that the employer use a “reasonable method” of crediting hours of service that is consistent with the statute. While the preamble does provide two safe harbor methods, the same guidance also instructs that such methods are not intended to be the only reasonable methods of crediting hours of service. The preamble also provides that a method is not reasonable if it takes into account only a portion of an employee’s hours of service with the effect of characterizing, as a non-fulltime employee, an employee in a position that traditionally involves at least 30 hours of service per week.

Safe harbor methods

Credit 2.25 hours of service (representing a combination of teaching or classroom time and time performing related tasks, such as classroom preparation and grading of exams) per week for each hour of teaching or classroom time (in other words, in addition to crediting an hour of service for each hour of teaching in the classroom, this method would credit an additional 1.25 hours for activities such as class preparation and grading), OR credit 1 hour of service per week for each additional hour outside of the classroom the faculty member spends performing duties he or she is required to perform (such as required office hours or required attendance at faculty meetings).

Work-study students

Crediting an hour of service for work-study students is much less complex than the analysis required for adjunct faculty. Under the final regulations, for work-study students, an hour of service does not include any hour of service to the extent the service is performed as part of a Federal Work-Study Program (defined as 34 CFR 675, or a substantially similar program of a state or political subdivision thereof). Thus, only hours of service performed by the student in a non-work study capacity are taken into account to determine if the student is a full-time equivalent for ACA purposes.

Next steps

Although the ACA was enacted in 2010, the effective dates of some of its provisions, including the employer mandate, have been delayed. In fact, the effective date of the employer mandate is now being phased in, depending on the employer’s size: the employer mandate is now effective beginning January 1, 2015, for employers with 100 or more full-time employees, but is not effective for employers with 50-99 full-time employees until January 1, 2016. However, it is important to note that employers may not reduce the workforce size or overall hours of service of their employees in order to qualify for the delay unless the employer has a bona fide business reason for the reduction. Since the one-year difference in effective dates turns on how many full-time employees the employer has, higher education institutions with workforces near the 100-person threshold are advised to begin to analyze adjunct employees’ hours of service, to determine whether such workers push them over the threshold; if so, the implementation date is only months away. If not, the employer mandate’s day of reckoning will come later.