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Business and Policy Areas
Business and Policy Areas

Health Care Reform Update: IRS Publishes Interim Safe Harbors Defining Full-time Employee Status and 90-Day Waiting Periods

September 20, 2012

The IRS has outlined several methods that employers may, but are not required to, follow for identifying full-time employees who must be offered group health coverage under the employer shared responsibility provisions of the Affordable Care Act (ACA).

These methods are coordinated with the maximum 90-day eligibility waiting period under group health plans and insurance policies. Notices 2012-58 (on determining full-time employees) and 2012-59 (on the waiting period) serve as interim guidance and will be effective through 2014.

The shared responsibility - also referred to as "pay or play" - provisions of the ACA (section 4980H of the Internal Revenue Code), become effective on January 1, 2014, for employers averaging 50 or more full-time employees. The guidance in the notices enables employers to use all or part of calendar year 2013 as a measuring period to identify full-time employees for purposes of a "stability period" to approximate healthcare costs in 2014, were they to "pay" excise taxes or "play" by offering full time workers group health coverage defined by ACA as "adequate" and "affordable."

Key provisions of Notice 2012-58 include:

  • Full-time employees are defined as those working an average of 30 hours per week.
  • To classify newly hired "variable hour" and "seasonal employees" as full-time, or not full-time, employees may be evaluated over a look-back or "measurement" period of between three and 12 months, and their resulting classification as full-time (or not full-time) may be locked in for a subsequent "stability period," regardless of their actual working schedule during the stability period. No coverage need be offered to any such employees during the chosen measurement period, and during the stability period, only to employees who average 30 hours a week or more during the measurement period.
  • Employees not meeting the definition of full-time employee may apply for and receive premium assistance on a state exchange during any period when coverage is not offered under their employer's plan.

The notice also includes several examples illustrating how the safe harbors apply to ongoing, new, and seasonal or variable-hour employees.

Notice 2012-59 address the application of the maximum 90-day eligibility waiting period, including the conditions under which employers may require more than 90 days of service or other minimum periods of service and how the 90-day maximum applies to variable hour employees.

As noted above, the guidance included in both notices will be in effect through 2014.


Mary Bachinger
Director, Tax Policy