A big question that employers have is whether or not they need to offer health coverage to those individuals who are currently on a leave of absence and/or receiving disability benefits.
The short answer is yes – all Applicable Large Employers (ALEs) are required to offer health coverage plans to their full time employees. If an employer fails to do so, they could be subject to paying penalties. According to the ACA (Affordable Care Act), a full time employee is defined as an individual that works at least 30 hours or more every week. When an employer is determining whether an employee is full time or not, employers can use one of two methods: monthly method, meaning full time status is determined on a monthly basis, or the look-back method, where full time status is determined by calculating the average number of hours an employee works over a defined period of time.
Monthly Method VS Look Back Method
If your company is currently using the monthly method, health coverage must be offered to all employees who work either more than 30 hours each week or a monthly equivalent of 130 or more hours. In addition, employees on leave and/or are receiving disability benefits are entitled to receive an hour of “credited service” for every hour they are otherwise entitled to be paid for. For example, if John is a full time employee and works 40 hours a week and during the first two weeks in a month he received disability payments which resulted in 90 hours of credited service, John must still be offered coverage for that month because he was still being paid for a service period of 130 hours.
Look Back Method
Based on the look back method, whether an employee is considered a full time employee is based on their hours worked over a defined period of time; referred to as a measurement period. After determining if an employee is considered full time or not, that determination will remain in effect throughout the further defined stability period. In short, if an employee has been determined to be full time based on their hours worked but then goes out on a leave of absence during the stability period, they are entitled to continue to receive coverage for the entire duration of the stability period.
If you have determined an employee to be full time, they are entitled to receive health coverage through their employer regardless of them taking a leave of absence or receiving disability benefits. Companies who fail to comply with this regulation could face significant penalties.
How PAYDAY Workforce Solutions Can Help
The expert staff and HR partners here at PAYDAY can help keep you in compliance with the ACA and are more than happy to answer any questions you might have. We can help assist you in understanding the rules and regulations of the ACA and help you avoid any penalties. If you have any questions regarding the information in this article or questions regarding short term or long term disability payments, contact our expert staff anytime at (714) 467-3434.