While 2014 is still technically “next year,” employers of 50 or more people should be mindful that, in determining their liability for the health insurance mandate, the government will rely on 2013 data.

Date: March 2013

Starting in January 2014, the Patient Protection and Affordable Care Act (or “Obamacare”) will require employers with 50 or more full-time employees (or the combined part-time equivalent, explained below) to provide health insurance or pay a tax.

While 2014 is still technically “next year,” it is important to recognize that, in determining whether an employer will be liable under that provision, the government will rely on data about the composition of employers’ workforces this year. The bottom line: Employers need to adjust or manage the makeup of their workforce now.

The current proposed regulations can be found on the IRS website. As few employers look forward to wading through the 144-page document that contains the proposed regulations, we offer the following, somewhat shorter, summary and invite you to contact us with any questions.​​

Full-Time Employees

Generally, to determine the number of full-time employees in a given month, an employer will add the number of persons who work 30 or more hours on average per week in a given month to the number of full-time equivalent employees in that same month. The number of full-time equivalent employees in a given month is calculated by adding the total number of hours worked by part-time employees in a given month (those who work 29 hours or less on average per week in that month) and dividing by 120 hours.

Measurement Period

Recognizing the administrative burden of monthly determinations of full-time status, and the possibility of employees moving in and out of employer (or exchange) coverage as frequently as monthly, the IRS allows employers to make the full-time determination based upon a measurement period of no less than 3 months and no more than 12 months (also known as a “look-back measurement period”), although during the “transition period” (calendar year 2014, based on time worked in 2013) the look-back measurement period is slightly different. In the transition period, employers may use a look-back measurement period that is shorter than 12 months but no less than 6 months (rather than 3 months), so long as the look-back measurement period begins no later than July 1, 2013, and ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014. The look-back measurement period in the transition period may begin after July 1, 2013, if the employer is using a measurement period of 12 months.
Generally, any employee who qualifies as full-time during the look-back measurement period (not including the part-time employees who make up the calculation for full-time equivalent employees) will be considered full-time for the subsequent period of the same duration (the “stability period”), regardless of how many hours that employee works in the stability period, so long as the employee remains employed in the stability period.

Tax On Non-Sponsors

The alternative is to pay a tax of 1/12th of $2,000 per full-time employee in a given month (where no insurance is offered) or 1/12th of $3,000 per full-time employee in a given month (where some kind of insurance is offered, but it does not meet all the requirements of the statute). The 1/12th of $2,000 tax applies to all full-time employees in a given month so long as at least one of them successfully enrolls in a qualified health plan for which an applicable premium tax credit or cost-sharing reduction is allowed or paid, whereas, the 1/12th of $3,000 tax only applies to each full-time employee so enrolled. An employer required to pay the higher tax will not, however, be required to pay any more tax than the product of the total number of its full-time employees times 1/12th of $2,000 (which equates to the tax for not providing insurance at all).

Getting Started

Obamacare allows employers to have a waiting period of no more than 90 days before offering health insurance to eligible employees. For ongoing employees, the waiting period is permitted to run after the applicable measurement period. The guidance for the waiting time provision, which applies to 2014 only, explains that a waiting period based solely on the lapse of a time period (e.g., 90 days) is permissible. Accordingly, as a practical matter, Obamacare does not apply to employees who work less than 90 days.
Should an employer elect to use a look-back measurement period for determining whether employees are full-time, in order to prevent the waiting period from creating any potential gaps in coverage for ongoing employees, the waiting period must overlap with the prior stability period so that those ongoing employees who are enrolled in coverage because of their full-time status based on a prior measurement period will continue to be covered. After the initial measurement period, the 90-day waiting period may be applied to new employees reasonably expected to work an average of 30 hours or more per week in a month (no look-back measurement period should be included).
In 2014 only, for variable-hour employees (i.e., whose hours are reasonably expected to average less than 30 hours per week, or whose full-time status will be of limited duration and cannot reasonably be determined in advance), the rule is the same as for full-time ongoing employees: the employer may use a look-back measurement period to determine full-time status. Regardless of the length of the measurement period for variable employees, however, the measurement period plus the 90-day waiting period may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (or 13 months).​


For employees who may be terminated and rehired as full-time employees in a given year, the employer may restart the measurement period under certain circumstances. If the lapse in service is for at least 26 consecutive weeks, then the measurement period may be re-started. Or, for periods of less than 26 consecutive weeks, the employer may re-start the measurement period if the lapse in service is at least 4 consecutive weeks and is longer than the employee’s period of employment immediately preceding the period in which the lapse in service occurred.
For example, the employer may re-start the measurement period where an employee is terminated after 6 weeks of service and is rehired 13 weeks later. That is because the 7-week lapse in service consists of at least 4 consecutive weeks and is greater than the 6 weeks for which service was previously provided.

Seasonal Workers

The look-back measurement period rules also apply to seasonal workers. A “seasonal worker” is one “who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by Section 500.20(s)(1) of Title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons.” The regulations require employers to construe the term “seasonal worker” reasonably and in good faith.
The Obamacare regulations specifically invite comments regarding whether a definition of “seasonal worker” should be adopted based on a specific time period, such as 6 months. It is argued that such a definition would give employers more certainty and is consistent with other laws such as the definition of a seasonal employee for purposes of self-insured medical reimbursement plans.

Short-Term Employees

The Obamacare regulations briefly discuss the issue of “short-term” employees who are expected to work full-time, but for a limited duration. As explained above, Obamacare does not apply to employees who work for less than 90 days. With respect to “short-term” employees expected to work more than 3 months, employers have requested that special rules be adopted for determining the full-time status of such employees. As with the definition of “seasonal worker”, the regulations invite comments regarding what rules may be appropriate for “short-term” employees. The government’s main concern, and the reason it has not adopted special rules for “short-term” employees thus far, is that the potential for employers to abuse any such rules outweighs the administrative burden on employers who are required to provide health insurance to “short-term” employees based on the monthly hourly average system currently in place.

Unusual Compensation

The Obamacare regulations also briefly address how to handle positions that are not compensated in a traditional way, such as adjunct professors who are paid on a credit hour basis. The Obamacare regulations advise that employers that compensate employees on a unique basis must use a “reasonable” basis to determine whether the employee qualifies as a full-time employee. An example given is that an employer should not only count an adjunct professor’s hours spent in providing instruction in order to avoid reaching full-time status; rather, time spent for preparation and other related activities should also be considered/included. As with the definition of “seasonal worker” and how “short-term” employees should be treated under Obamacare, the regulations invite employers that may wish to compensate their employees on a more unique basis to submit comments on whether any special rules would be appropriate.


In the likely event that you have questions about any of the issues discussed above, please contact any member of Barton Law’s employment law practice group. You are invited to email Adrian Barton, or call her at 480-425-2600.

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