Employee health insurance safe harbors expanded

The IRS expanded and revised optional safe harbors on which applicable large employers may rely in complying with requirements starting in 2014 to provide health insurance coverage to their full-time employees.

The safe harbors, described in Notice 2012-58 and previous notices, provide methods of determining the full-time status of seasonal employees and those with unpredictable work schedules for purposes of the “shared responsibility” requirements of Sec. 4980H, enacted in the Patient Protection and Affordable Care Act of 2010, P.L. 111-148.

Generally, for months beginning after Dec. 31, 2013, the law requires employers with at least 50 full-time employees on average during the preceding calendar year to sponsor and offer full-time employees and their dependents health coverage meeting certain requirements or else pay an assessment. The law defines full time as working on average at least 30 hours per week, but Congress left it to the IRS, along with the U.S. Department of Labor, to prescribe how that average is computed and applied.

Notice 2011-36 described a lookback “measurement period” safe harbor for averaging hours of ongoing employees and a “stability period” to which the average applies. For new hires, Notice 2012-17 proposed an initial measurement period of between three and six months for workers with variable or uncertain hours. (For prior coverage, see “Employer Health Coverage Questions Addressed.”)

In Notice 2012-58, the IRS expanded the measurement period for new variable-hour and seasonal employees to the same as for ongoing employees—any interval of between three and 12 months. The stability period must be at least as long as the initial measurement period and no less than six months. The notice allows an “administrative period” for such workers of up to 90 days after the initial measurement period and before the beginning of the stability period. However, the measurement and administrative periods combined must not extend beyond the last day of the first calendar month that begins on or after the first anniversary of the employee’s start date.

The notice also restated earlier safe-harbor notice provisions, provided definitions of variable-hour and  seasonal employees, and included several examples.

Employers may rely on the notice at least through the end of 2014.

The IRS requested comments on specific questions by Sept. 30 in a form and manner described in the notice. The questions concern additional safe harbors for temporary and short-term employees and those in high-turnover positions; defining variable hours and a reasonable expectation of working at least 30 hours a week; coordinating employers’ differing measurement and stability periods following a merger or acquisition; and further defining seasonal workers.

—Paul Bonner (pbonner@aicpa.org) is a JofA senior editor.