October 2012 - Parks & Recreation - 34

A D V O C A C Y U P D AT E

CL ARIT Y AND THE AFFORDABLE HE ALTHCARE AC T

Court reviewed a case challenging
the constitutionality of the law. Now
that the law has been upheld as constitutional, we are starting to see the
release of much-needed guidance.
Employers, in determining whether
they are in compliance with the law,
need to take two separate steps. First,
the employer must determine whether
it is a " large employer " for purposes of
the Act. Second, if the employer is determined to be a " large employer, " then
the employer must determine whether
it is offering and providing insurance
to those employees eligible to receive
health insurance. If the employer is
found not to be offering and providing insurance in compliance with the
Act, the employer will be assessed a
monthly penalty.

How Large is Large?
The PPACA uses several calculations to
determine who must comply with new
coverage mandates. It requires " large
employers, " those who employed 50 or
more full-time or full-time equivalent
employees during the preceding calendar year, to offer all full-time employees and their dependents affordable
and comprehensive health insurance,
as deﬁned by the Act. For purposes of
the Act, " full-time employees " are those
who work an average of 30 or more of
hours per week in any month. In making the " large employer " determination,
an employer must include in its calculation seasonal employees who work 120
days or more per year, and must use a
speciﬁed formula to calculate the number of " full-time equivalent " employees
based on the number of hours worked
by all part-time employees.
Beginning in 2014, if a large employer fails to offer or provide affordable
and comprehensive health insurance
to all full-time employees and their dependents, it will incur a penalty if one
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Parks & Recreation

or more full-time employees receive a
" premium tax credit " to assist the employee with paying for health insurance. Note that PPACA stipulates that
employers need to offer and provide
insurance only to full-time employees.
Therefore, employers are not required
to offer or provide health insurance to
part-time employees and are not at risk
for being assessed a penalty if a parttime employee receives a " premium
tax credit. "
It is also important to note that the
PPACA applies to local governments in
the same manner as it does to privatesector employers, and it is likely that
most local governments would qualify
as " large employers, " thereby making
them subject to a penalty for failure to
offer or provide full-time employees
with affordable and comprehensive
health insurance. While employers will
not begin to incur a penalty for noncompliance until January 2014, the determination of which employers are
subject to the penalty will be based on
the number of employees employed by
the employer in 2013.
So, even if an employer knows that
an employee has insurance through
another means, the employer will need
to offer that employee insurance and
then follow the administrative procedures set forth in the law to report that
the employee was offered insurance
but chose to decline. Finally, the insurance that employers provide to their
employees must meet certain standards-it must be " affordable and comprehensive " as deﬁned by the law.

Full-Time Seasonal Employees
Once an employer determines it is a
" large employer, " the next step is to ensure it is providing insurance to all employees eligible for health insurance.
The PPACA, as written, appeared to
require employers to offer insurance

| OCTOBER 2012 | WWW.NRPA.ORG

to full-time seasonal employees who
work 120 days or more during the year.
It further requires that the employee
be offered the insurance within the
ﬁrst 90 days of that employment. So,
this meant that a seasonal employee
who was hired to work for 120 days and
worked an average of 30 hours per week
would need to be offered insurance on
the 90th day of his or her employment
and would then be eligible for health insurance beneﬁts for 30 days. In addition
to the obvious administrative nightmare and cost associated with insuring
an employee for 30 days, this provision
also subjected employers to obligations
under the Consolidated Omnibus Budget Reconciliation Act (COBRA) upon
the termination of the employee's employment, thereby creating more administrative burdens.
Fortunately, recently released IRS
guidelines (IRS Notice 2012-58; www.
irs.gov/pub/irs-drop/n-12-58.pdf) grant
employers much reprieve. These guidelines allow employers to use a " lookback/stability period " safe-harbor
method to determine whether a seasonal employee is a " full-time employee, " and is thereby required to be offered
and provided health insurance. Under
this method, the determination as to
whether an employee must be offered
and provided health insurance is no
longer based on the 120-day threshold,
and employers are no longer required
to offer employees health insurance on
or before day 90.
Instead, employers may now create
their own " deﬁned measurement period " which can span between three
and 12 months, and will be used to determine an employee's full-time status. Employers have the ﬂexibility to
determine the start and end months
for the deﬁned measurement period.
An employee who averages at least
30 hours of work per week during the

October 2012 - Parks & Recreation

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