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Health Care Reform: House Committee Considers Full-Time Employee Definition Under ACA

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October 2013

A House Small Business Committee recently heard testimony concerning the ACA definition of full-time employee, and noted that the current rules may act as a disincentive for businesses to grow and add new jobs—especially full-time jobs. While action on this front may not be imminent, many employers remain hopeful that the current rules will be altered. Beginning in 2015, Section 4980H of the Internal Revenue Code will require all employers with 50 or more full-time equivalencies to either offer insurance to substantially all full-time employees or pay a tax. This “pay or play” mandate has been discussed in various prior alerts, and remains a major topic of discussion among employers even now in 2013. Central to the pay or play mandate is the need to determine which individuals are full-time employees. Currently, IRS proposed regulations provide employers with guidance on how to count and average hours worked over a “standard measurement period,” to determine whether or not an employee works at least 30 hours per week, and is therefore a full-time employee pursuant to ACA. This guidance has caused many businesses to adjust the work schedules for their employees to avoid or lessen tax exposure under Section 4980H of the Code. 

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