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Leaves of Absence under the Affordable Care Act

 October 27 2015     Shelly Hodges-Konys and David Anthony

As applicable large employers (those with 50 or more full-time equivalent employees) implement solutions to comply with reporting requirements under the Affordable Care Act, many employers are left wondering how to treat employees in the event they experience a leave of absence. How to handle employee leaves of absence depends on how you have chosen to determine an employee is full-time (monthly method or look-back safe harbor), the type of leave, and current company record keeping.

As a general rule, if an employee is terminated from employment and is rehired within a 13 week period (26 weeks for educational organizations) or the employee experiences an unpaid leave of absence of less than 13 weeks, the employee may not be treated as a new hire. The employee upon rehire or return from leave must be treated as an ongoing employee and retain their full-time or part-time employee status and any health benefits eligibility as previously established. Employees experiencing more than a 13 week break in service (26 weeks for educational organizations) may be treated as a new hire. 

Under the ACA, any hour for which an employee is paid or entitled to be paid is considered an hour of service and must be counted when determining whether or not an employee is considered full-time. Under the monthly method, an employee is considered full-time if having worked 130 hours in an applicable month. On the other hand, under the look-back safe harbor method, an employee is considered full-time if they averaged 30 or more hours per week during a chosen measurement period. This means that employers must include not only actual hours worked, but certain paid and unpaid leaves. These include: vacation, holidays, sick leave, jury duty, layoff, military duty, incapacity (including disability), and leave of absence.

Under the look-back safe harbor method of determining full-time employee status, an employer must choose one of two methods for crediting an employee for hours of service when on paid leave of absence or special unpaid leave that must be credited like jury duty, military duty, and FMLA. The employer must either credit the employee for the time missed with the average hours worked within that given period (e.g. An employee who averages 30 hours per week, took a one week unpaid FMLA leave, that employee should be credited as having worked for 30 hours for the week of unpaid FMLA leave) or exclude the time the employee took unpaid special leave from the determination of full-time status all together. Past procedure and current record keeping systems may make it difficult for an employer to know when and why an employee was on leave and whether or not to credit hours of service.

When setting up a reporting system to manage the tracking and reporting of Affordable Care Act regulations, it may be best to take a conservative approach and give credit for hours worked during leave of absence when the type of leave is unknown.