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Keeping you informed about the rapidly changing ACA environment and how it’s affected by COVID-19

We know that workplace challenges often create the greatest stress on HR teams who are working diligently to keep their workforce healthy and safe. That's why we are committed to sharing what we know around regulatory changes and their bearing on health reform, insurance eligibility, payroll and more.

To keep you in the know, here's our Ask the Expert question of the week:

Q. Millions of employees have been terminated due to the COVID-19 fallout. As economic conditions stabilize and organizations can rehire their displaced workers, how does that break in service impact ACA reporting obligations?

A: There are two issues you need to address as each terminated employee is rehired:

  1. Whether the employee was enrolled in your organization’s benefit plan before termination.
    • Any returning employee who previously had been offered coverage before termination and is ACA-eligible upon return, must have an offer of coverage upon return, and by the first of the following month at the latest.
    • Termination means that when an employee's job has come to an end and an employer is no longer tracking hours or offering benefits to that individual (with the exception of COBRA continuation benefits). If the employee was not actually terminated from employment, (for example, was placed on furlough or leave of absence) the questions and risks for the employer may be different.
  2. Determination of the employee’s ACA full-time status, which depends when they return to work and how you count their worked hours, even though they accumulated no worked hours while terminated.
    • Under the look back method, if an employee returns to work in less than 13 weeks from the termination date (26 weeks for employees in the education sector), they must be treated as an ongoing employee, as if they never left your employment. That is, they must be placed back into the measurement and stability period as if they never left, including the period of time during which they were not an employee and accumulated no hours.

Assuming the returning employee is classified as ACA full-time, and they had coverage before their break in service, or was eligible to obtain coverage during the break, through open enrollment, then the employer must offer coverage to them no later than the first day of the calendar month following their return to work. Failing to offer coverage in that timely manner could result in IRS penalties. For B Penalty risks of furloughed vs. terminated employees, see last week’s Ask the Expert.

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