ACA Rules:
Change in Employment Status
Change in Status
PT to FT
New employee
changes from PT
to FT position
during Initial
Measurement
Period:
Ongoing
employee
changes from PT
to FT position:
ACA Rules

Offer coverage effective no later than the first day of the
4th full month following the change in status; however, if
the employee averaged at least 30 hours/week during
the initial measurement period, coverage must be
offered by the beginning of the stability period if that is
earlier.

Note: The waiting period under the plan may be shorter
and may require that coverage be offered sooner than
what is required under ACA.

The change does not affect the employee’s status as PT
for the remaining portion of the stability period, so the
employer is not required to offer coverage immediately
upon the change in status. However, coverage must be
offered for the stability period immediately following the
measurement period in which the employee worked an
average of at least 30 hours/week.

Note: Employers may be more generous than what the
law requires and offer coverage sooner (e.g., when the
employee changes from a PT to a FT position). However,
plan provisions should clearly set forth eligibility
requirements that will be followed.
Examples
A new employee started working for the employer in a
PT position on Sept. 1, 2016 and changed to a FT
position on Nov. 1, 2016. The employee must be
offered coverage effective no later than Feb. 1, 2017
(coverage should be effective no later than the plan’s
normal waiting period).
An ongoing employee has worked in a PT position for
two years before changing to a FT position on Nov. 1,
2016. The measurement, administrative and stability
periods are as follows:



Measurement Period: May 1 – April 30
Administrative Period: May 1 – June 30
Stability Period: July 1 – June 30
The employee retains his/her status as PT for the
remainder of the current stability period (until June 30,
2017). The employer should offer coverage effective July
1, 2017 if the employee works an average of 30
hours/week over the period May 1, 2016-April 30, 2017.
Change in
Status FT to PT
General Rules 
for ongoing
employee who
changes from
FT to PT
position:

Exception to
the General
Rule:
ACA Rules
Examples
Status as a FT employee is locked in
for the remaining portion of the
current stability period, so coverage
would continue to be offered at least
until the end of the stability period in
which the change in status occurs.
Employee switches from FT to a PT position March 1, 2016. The measurement,
administrative and stability periods are as follows:
Coverage may also be required for the
following stability period if the
employee averages at least 30
hours/week during the measurement
period in which the change in status
occurs.
The employee is entitled to remain covered at least until June 30, 2016 (the end of
the current stability period). However, if the employee averages at least 30
hours/week for the period May 1, 2015 – April 30, 2016 (the current measurement
period), then he or she should be offered coverage for the next stability period (July
1, 2016 – June 30, 2017) as well, unless the exception noted below applies.
The employer may switch to the monthly
measurement method (even if the lookback measurement method is used for all
other employees in the same category)
starting with the first day of the 4th full
month after the change in status if:
 Minimum Value coverage was
offered continuously since the
beginning of employment (or
within 3 full months), through the
month in which the change in
status occurs, and
 The employee averaged less than
30 hrs/week for each of the 3 full
months after the change in status.



Measurement Period: May 1 – April 30
Administrative Period: May 1 – June 30
Stability Period: July 1 – June 30
Using the same example above, assume the employee had worked for the
employer for 10 years and had been offered coverage continuously since the
beginning of employment. The employee changes to a PT position March 1, 2016
and works less than 30 hours/week for March, April, and May. The employer may
terminate coverage (and offer COBRA coverage) effective June 1, 2016.
The employer may apply the monthly measurement method for this employee
through the end of the first full measurement and administrative period after the
change in status occurs (i.e., through June 30, 2017 in this example).
Practical Note: The exception above is limited, but may apply in some cases. It requires employers to determine on an individual basis whether an employee
was offered coverage since the beginning of his/her employment and also requires a month-by-month monitoring of hours after the change in status.
Because it's a narrow exception and will require administrative time and effort, employers may choose to apply the general rule instead, and continue to
offer coverage at least through the end of the stability period in which the change in status occurs.
Copyright © 2015 Benefit Compliance Program. This document is for informational purposes only and does not constitute legal or tax advice.
Change in
Status FT to PT
(cont.)
Affordability
Concerns
IRS Notice
2014-55
New Hire
changes from
FT to PT:
ACA Rules
Examples
In order to avoid penalties, employees
cannot pay more than 9.5% of their
income toward the lowest cost single
premium. Employees who have changed
to a PT position will likely have less
income which may mean that what they
are required to pay toward the lowest
cost single premium is no longer
considered affordable under the law.
Employers should consider the three
affordability safe harbors (W-2, rate of
pay or federal poverty level) to determine
which to apply consistently in these
situations.
An employee who has a change in status
may drop coverage even if the employee
remains eligible for coverage.
Employee switches to a PT position on March 1, 2016 and also experiences a
reduction in income. The employer uses the rate of pay safe harbor for all
employees in the same class. The employer uses the following formula to
determine affordability:
ACA regulations provide that new
employees who are reasonably expected,
as of their start date, to work FT generally
will have full-time status determined
under the monthly measurement method
until they complete one full standard
measurement period. Thus, under the
monthly measurement method, coverage
could be terminated if a new employee
who was expected to work FT does not
average at least 30 hours/week during a
month.
A new employee hired on March 1, 2016 is expected to work FT and is offered
coverage effective April 1, 2016. On August 1, 2016, the employee changes to a PT
position in which the employee works less than 30 hours/week. The employer may
terminate coverage effective August 1, 2016 and offer COBRA coverage. The
employer should monitor the employee’s hours on a monthly basis until the end of
the first standard measurement period to ensure the employee works less than an
average of 30 hours/week during each month.
Employee’s
hourly rate of
pay*
X
130 hours/month
(regardless of the number
of hours actually worked)
X
9.5%
The result is the employee’s maximum monthly contribution toward the lowest
cost single premium in order to satisfy the affordability requirement.
*Rate of Pay safe harbor cannot be used for a salaried employee who experiences a
reduction in income during the year.
Using the same example above where the employee switches from FT to PT March
1, 2016, the employee may drop coverage for the employee and family members
effective March 1, 2016 even though the employee remains eligible.
Copyright © 2015 Benefit Compliance Program. This document is for informational purposes only and does not constitute legal or tax advice.
Rehired Employees & Unpaid Leaves of Absence
(Rules set out below apply only if using the look-back measurement method. Different rules apply if using the monthly measurement method.)
Rehired
Employees
Employee has 0
hours of service
for at least 13
consecutive
weeks (26 weeks
for educational
organizations)*
Employee has 0
hours of service
for less than 13
consecutive
weeks (26 weeks
for educational
organizations)
ACA Rules
Treat rehired employee or employee who returns from an unpaid leave of absence
as a New Hire:

If employee is rehired into FT position, offer coverage within three months (or
within the plan’s normal waiting period, if earlier).

If employee is rehired as variable hour, seasonal or PT, start new look-back
measurement period to track hours to determine if FT.
Treat rehired employee or employee who returns from unpaid leave of absence as a
Continuing Employee:

Employee retains FT or PT status he or she had for the remainder of the stability
period. (The same limited exception that applies under Change in Status rules also
applies here.)

If FT employee was covered under the plan, offer coverage by 1stday of month
following rehire date. If employee had declined coverage for the stability period,
the employer is not required to make a new offer of coverage upon rehire or
return from leave of absence.

Resume counting hours for remainder of measurement period with 0 hours
counted for the period of absence, unless employee was on special unpaid leave
(e.g., FMLA) or if considered an employment break (absence of at least 4
consecutive weeks for employees of educational organizations).
Examples
A FT employee retires March 1,
2016 and is rehired into a PT
position on Nov. 1, 2016. Coverage
is not offered upon rehire. The
employee is treated as a new
employee with a new initial
measurement period.
A FT employee who was covered
under the employer’s health plan
retires May 30, 2016 and is rehired
into a PT position on August 15,
2016. The employee is treated as a
continuing FT employee for the
remainder of the stability period
and should be offered coverage
effective September 1, 2016.
The employee may qualify for
coverage the following stability
period if he/she works an average
of at least 30 hours/week during
the current measurement period.
*An employer may choose to apply the Rule of Parity in which the employer chooses a period of at least 4 consecutive weeks. If a break in service exceeds the greater of 4 weeks (or the
number of weeks chosen by the employer) or the prior employment period, then the employee may be treated as a new employee. For example, if an employee worked for an employer
for 6 weeks and then has an 8 week break in service, the employee may be treated as a new employee upon rehire or resumption of services. This rule may be helpful for employees who
work for a short time, have a break in service and then are rehired or resume providing services, but not helpful for situations that involve longer term employees.
Copyright © 2015 Benefit Compliance Program. This document is for informational purposes only and does not constitute legal or tax advice.