The Affordable Care Act requires that large employers provide medical benefits to full-time employees. Generally, employers who employed at least 50 full-time employees (including equivalent part-time employees) on business days during the preceding calendar year are considered large employers. Employers with 50 or more employees are required to provide coverage.

The IRS has provided guidance to employers who are subject to the employer mandate, and who hire employees where it initially cannot be determined if the employee will work more or less than 30 hours per week. The IRS defines these employees as variable hour employees. Employees who are hired and are reasonably expected to work 30 hours or more per week on average should be considered full-time benefit eligible employees from their hire date.

When employees are hired and employers are unsure how many hours they will work, the IRS has created a safe-harbor method for determining whether or not these employees should be eligible for medical benefits. Employers will have the option to use the IRS guidance for determining eligibility by looking back at the number of hours that were worked during a specified time period. At the employers discretion the look-back period may be as short as 3 months and as long as 12 months. The number of months that the employer chooses to look back, is called the standard measurement period. The employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided that the determination must be made on a uniform and consistent basis for all employees in the same category.

If the variable hour employee was determined to be a full-time employee during the standard measurement period, then the employee will be treated as a full-time employee during a subsequent “stability period,” regardless of the employee’s number of hours of service during the stability period, so long as he or she remained an employee. If it is determined that the employee worked less than 30 hours per week on average, then the employee would not be eligible for benefits during the subsequent stability period. The stability period must be equal in length to the measurement period. However, it may not be shorter than 6 months.

Large employers with variable hour employees should make sure that they are aware of the number of hours employees are working now. Employers can take action now to make adjustments to work schedules to ensure there are no surprises.

Helpside has the expertise to help our clients navigate the Affordable Care Act. If you need assistance with making a plan for compliance or general questions about the ACA, please contact your Client Account Manager.

Steve Anderson is the Benefits Manager for Helpside.

The information provided on this post is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and is not intended to be tax or legal advice. This information presented is a very general overview of detailed IRS rules, additional information is available by visiting

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