By Helen Karakoudas | ACA Education Director
May 9, 2016

How to credit ACA hours for unpaid leave_Integrity DataIn its regulations for enforcing the Affordable Care Act, the IRS singles out three situations of unpaid absence from the job that all employers who must be ACA-compliant need to take into account when tracking an employee’s eligibility for health insurance:

  • Absence to serve on a jury
  • Absence under the Family and Medical Leave Act of 1993 (FMLA)
  • Absence under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

Employers using the monthly measurement method to show an employee as being full-time (and thereby eligible for health insurance) can account for this time the same as they would had the employee been on the job.

For employers using the look-back measurement method to determine full-time status, the IRS allows use of one of two methods of calculating averages to account for this time:

  • METHOD 1: Look only at the time worked and base the 30-hour threshold on that time.
  • METHOD 2: Credit the employee with hours as if they had worked during this unpaid time.

The averaging calculation for either not penalizing the employee or crediting them with hours – as if they had worked – is the same for all three absences.

The important factor to note is that the results of either method will always be identical for determining the average hours per week.

Example of crediting ACA hours for unpaid leave_Integrity DataIn our example, an employee was credited with 1,421 hours of service while not on unpaid leave. This employee was then were on unpaid leave for six weeks. The employer is using a 12-month measurement period.

  • Using the first method, we test them within the measurement period for only the actual time they worked – not the six weeks of unpaid leave. So instead of using 52 weeks, we take 1,421 and divide that by 46 weeks to get an average of 30.89 hours a week.  
  • Using the second method, we do the same thing, get the average hours per week that they worked while not on unpaid leave, and then credit the unpaid leave time with those average hours.

Integrity Data’s ACA Compliance Solution uses Method 2 – crediting hours as if the employee had worked that time.

Originally we had used Method 1, but feedback from our users was that when looking at reports of variable-hour employees, it was confusing to see someone with 1,421 hours be determined as eligible while others had to meet 1,560 hours in order to be eligible. By switching to the second method and adding in an unpaid leave column for those hours, we were able to equalize everyone’s hours.

Learn more about Integrity Data’s ACA Compliance Solution here.

Related posts:

How to convert non-hourly compensation to ACA service hours

ACA math must-know for crediting on-call hours

Related video: 

 

Integrity Data’s publications and presentations are designed to make employers aware of IRS reporting requirements under the Affordable Care Act, best practices for compliance with those requirements, and the consequences of noncompliance. This material is intended to provide accurate information as of the date posted. It is provided with the understanding that neither Integrity Data, nor the authors and presenters, are rendering legal or accounting advice.
With respect to your organization’s decision making for Affordable Care Act compliance, review the information presented with legal counsel specializing in employee benefits law.