When there are compensation programs that are based on output rather than hours, the tracking of time toward an employee’s eligibility for health insurance can be a challenge for an employer required to comply with the Affordable Care Act.
In these situations, IRS regulations for ACA enforcement require an employer to find a “reasonable” method for converting an employee’s time to an hours-of-service equivalent, so that all their time can be accounted for.
Though “reasonable” is not defined in ACA regulations, the inference is that employers cannot deploy methods that are designed to limit any employee’s access to health insurance.
Coming up with a conversion factor that credits an employee with the appropriate hours is not the only factor that must be considered. There are cases in which the IRS has mandated that an employee be credited with hours of service for time that might not be apparent. So in the case of commission-only salespeople, for example, failing to take travel time into account would not be considered reasonable.
In our experience with employers who do need to use service-hour conversions, we have come across a range of industry-specific methods relating to employees paid for piecework.