Notice 2012-58 (August 31, 2012) describes a number of safe harbors related to the employer mandate under the Affordable Care Act. In today’s post, I want to focus on the Notice’s safe harbor method for determining the full-time status of newly-hired “variable hours” and seasonal employees. Employers are likely to find this safe harbor very helpful.

If a new employee is not reasonably expected to satisfy a plan’s “full-time employee” eligibility requirement when he or she is first hired, Notice 2012-58 permits employers to use a look-back period of three or more months, up to a maximum of 12 months, to determine full-time status. That status will depend on whether the employee averages 30 or more hours per week during the look back period. Whichever determination is made, the employee then retains his or her full-time or non-full-time status or purposes of the employer mandate during a “stability period” equal to six months or the number of months in the determination period, whichever is longer.

To accommodate plans that begin coverage on the first day of the first month next following completion of a service requirement, Notice 2012-58 effectively provides that the stability period need not start immediately after the look-back period ends. Instead, an employer’s plan can provide for an intervening “administrative period” of up to 90 days, as long as an employee who is determined to be a full-time employee can enter the plan no later than the first day of the 13th month following the employee’s hire date.

There is one important limitation on the new safe harbor for newly-hired seasonal and variable hour employees. If the employee was determined not to be full time based on his or her initial look-back period, the employee must be “re-tested” as an on-going employee using a “standard measuring period.”

The standard measuring period is a period of time between three and 12 months long that begins on predetermined dates. For example, a calendar year plan might have a standard 12 month look-back period for on-going employees that begins on January 1 of each year. If so, an employee hired on November 5, 2014, would have an initial 12 month look-back period that ends on November 4, 2015, and a standard look-back period that ends on December 31, 2015. Thus, if the employee is determined not to be a full-time employee after the initial look back period, the 12 month stability period normally associated with that determination will end prematurely if the employee qualifies as a full-time employee during his or her first full-plan year. By contrast, if the employee qualifies as a full-time employee during his or her initial look back period, the employee retains that status for the entire stability period, even if the employee is determined not to be a full-time employee during his or her first standard look-back period.

Despite this limitation, the new safe harbor for variable hour and seasonal employees is likely to prove very helpful to employers in retail, hospitality, and other sectors of the economy where hours often vary and there is the potential for heavy reliance on part-time or seasonal labor. Clearly, there will be some important planning to do in order to make the most of the safe harbor. Part of that planning may require careful examination of turn-over patterns. When it comes to positions characterized by frequent and rapid turn-over, there is a regulatory cloud on the horizon, and it is moving fast.  I plan to talk about that topic in a subsequent post.

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