Temporary Employee Benefit Coverage

Temporary Employee Benefit Coverage

Temporary Employee Benefit Coverage 150 150 Encore Benefits

If you ever employ temporary or “seasonal” employees, or you wonder whether your employees are temporary, here are the basics you should know.

Temporary Employee Benefit Coverage Under The Affordable Care Act

According to the definitions contained in the Affordable Care Act (ACA):

  • A “temporary” employee is one who is hired with the mutual expectation that the term of employment shall be less than 90 days. If you hire an employee with the intent to employ him/her for longer than 90 days, you must treat him/her from the date of hire as a regular employee for purposes of benefits eligibility.
  • A “full-time” employee is one hired with the mutual expectation of him/her working 30 or more hours per week. (Employees hired as “variable-hour” employees, for whom there can be no reasonable expectation at date of hire as to whether he/she will work more than 30 hours per week, are subject to the “Measurement Period” below.)
  • “Date of hire” is the first day that the employee is actively at work (as opposed to the day that an offer of employment is extended or accepted, onboarding paperwork is completed, etc.).

New-Hire Waiting Period

The ACA limits new-hire waiting periods for Benefit Coverage For Temporary Employees to no more than 90 calendar days from the date of full-time hire. Because mid-month eligibility dates are an administrative difficulty (both for the employer and the insurance carrier), the longest waiting period most insurance carriers will allow is the first of the month following 60 days after the date of full-time hire, especially for small employer plans.

Example:

ABC Company has a benefits waiting period of exactly 90 calendar days following date of full-time hire.  Bob is hired as a full-time employee on May 10. Bob will therefore be eligible for benefits on August 8.

XYZ Company has a benefits waiting period of first of the month following 60 days after date of full-time hire. Tom is hired as a full-time employee on May 10. Tom will therefore be eligible for benefits on August 1.

Orientation Period

The ACA does allow an “orientation period” to be added to the length of the waiting period. However:

  • The orientation period can be of no more than 30 days.
  • The regulations require that it be a “reasonable and bona fide employment-based orientation period” in which specific training and/or evaluation activities take place – it can’t simply be an excuse to effectively lengthen the new hire waiting period.  Employers who use an orientation period for new employees should have specific written policies detailing what the orientation period is meant to accomplish or evaluate.

Temporary Employee Benefit Coverage

If an employee is originally hired as a “temporary” employee but the employer then changes its intent to employ him/her for a longer period, most insurance carriers will allow the employer to retroactively apply the 30-day orientation period to their date of hire.

Example:

XYZ Company has a benefits waiting period for non-temporary employees of first of the month following 60 days after date of full-time hire.  Jane was originally hired as a temporary full-time employee on May 10, with the expectation that she would work for a period of less than 90 days.  However, by the time August 8 rolls around, there are no clear expectations of when Jane’s full-time employment will end; she should therefore be treated as a non-temporary employee, and should be considered as benefits-eligible on September 1 (first of the month following 60 days, plus the 30-day orientation period).

Variable-Hour Employees

If an employee is a “variable-hour” employee, the employer needs to measure actual hours worked during a “measurement period” (anywhere from 3 to 12 months, provided the same period is used for all variable-hour employees), and then treat the employee as either part- or full-time for a “stability period” (no shorter than the measurement period, and at least six months long) before beginning another measurement period.

Example:

XYZ Company has a written policy stating that variable-hour employees will have a measurement period of three months, followed by a stability period of nine months.  Jennifer is hired May 10.  As of August 8, her total hours worked since May 10 are divided by 12.85 (90 days is 13 weeks less a day); she is found to have worked an average of more than 30 hours per week.  She is thus treated as a full-time employee for purposes of benefits eligibility for the next nine months; starting on May 10 of the next year, XYZ Company again begins measuring Jennifer’s hours through August 8 to determine if she qualifies as full-time for the next nine months.