What Happens to Coverage When Employees Reduce Their Hours?
By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors
The Section 125 cafeteria plan regulations and the Patient Protection and Affordable Care Act (ACA) require employers to take certain actions when an employee reduces hours.
Consider this scenario: An employer has an employee who is reducing hours below 30 hours per week. The employee is performing the same job and duties. The employee was determined to be full-time during the most recent measurement period. The employee is currently in a stability period.
What happens when the employee reduces hours during a stability period?
Answer: The employee must be offered coverage through the entire stability period. The employee must remain classified as full-time for the rest of the stability period. An employee's full-time status determined in the measurement period determines the employee's status during the subsequent stability period. This is true regardless of why the individual's hours were reduced, or who chose to reduce the hours.
For information on when an employee can drop employer-based coverage or what happens when an employee transfers to a new part-time job, request UBA’s Compliance Advisor, “Frequently Asked Questions about Employees' Reduction in Hours”.