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.
By the catch
When compensation of workers on fishing boats is based entirely on the weight of the catch they bring in, we have seen “reasonable” center on how long the fishing boats are out.
On average, boats are out 12 hours a day.
Therefore, a worker is credited 12 hours times the number of days he or she is out on a boat.
So the crew of a fishing boat out for four days would each be credited with 48 hours.
By the haul
When compensation of long-haul truckers is based on miles traveled, one company we work with uses 50 miles to equal 1 hour of service.
So they would credit a trucker who traveled 400 miles in one day with 8 hours.
The 50-miles-to-1-hour-of-service conversion is based on such factors as speed limits and break times.
By the bin
In the case of compensation of apple pickers being compensated by the bin, one company we work with pays $13 a bin and estimates that a bin takes 1 hour to pick.
So an employee compensated $107.25 in a day would be credited with 8.25 hours. That is, 107.25 divided by 13.
By the class
The one workforce segment for which the IRS has given some guidance is adjunct faculty members at a higher-education institution.
For these employees who are paid by the class, the IRS has said that:
a) 2 ¼ hours of service (representing a combination of teaching or classroom time and time performing related tasks such as class preparation and grading of examinations or papers) per week should be used for each hour of teaching or classroom time and, separately,
b) an hour of service per week be used for each additional hour outside of the classroom that the faculty member spends performing duties he or she is required to perform (such as required office hours or required attendance at faculty meetings).