College students often have variable hours & their insurance eligibility doesn’t always match the IRS’s seasonal employee guidelines. Bud steps in to help.
We have an employee that is a full-time college student and typically has worked part time for us for multiple years (under 29 hours per week). He decided to take this semester off from college and has expressed interest in receiving more hours, which would put him into full-time status (+/-40 hours per week). This full-time status would only last around 120 days and then he will go back to part time (averaging 29 hours) for the foreseeable future while enrolled in college. How do we handle this increase, then decrease in status?
This employee has a plan that he purchased through the Exchange and received tax credits. I would like him to be aware of any tax implications that he would have if deciding to go full time. Our benefits are effective February 1st annually and the company has elected a 3-month lookback period. I appreciate any insight that you can provide.
Calculating Hours And Documenting Workforce Insurance Choices Known
Believe it or not, this was one of the most difficult questions to resolve since I started writing this column. In my research, I spoke with IRS officials, healthcare.gov representatives, and a number of veteran Benefit Advisors (who I soundly stumped while posing the question).
At first I thought the answer might be size dependent. In other words, does it matter if your company fits into the small or large group category? But the more I researched, I was able to determined that in this case, size doesn’t matter. The answer should be the same. So let’s get to it.
Let’s call your college student/employee Jimmy. As you explained, Jimmy is laying out a semester and will be working full time (a status you selected for him because of his request for more hours). Once you’ve changed his designation to full time, and his eligibility to join the health plan is clear, Jimmy is no longer eligible for either the Exchange plan he purchased or further subsidies. With that, Jimmy should enroll in your plan and work however long he needs to maintain his eligibility. Then, when he re-enters school and can’t work full time (and hence be eligible), he can again approach the Exchange and qualify for tax subsidies with his new enhanced income numbers.
It sounds like Jimmy is a trusted employee, so if you wanted to, you’d have the option of keeping him full time and therefore eligible for benefits. However, you must treat everyone in his circumstance the same way to avoid discrimination complaints. By simply adjusting the number of hours for all part-time employees, you could make all employees eligible at, say, 25 hours per week. This is an overhead decision that only you’re capable of making, though.
If you use the strict interpretation of the validation of part-time eligible employees (the “lookback period” technique), then Jimmy wouldn’t be eligible for benefits if he didn’t work more than 130 hours per month for the majority of the lookback period. But for the sake of argument, let’s say he did qualify as full time, the above scenario still applies. He is no longer eligible for tax subsidies or the Exchange plan.
Thank you, my friend, for a complex “what if” question that had me scratching my almost-bald head for a while. My final two cents is to advise you to check with your corporate advisors (legal, financial, etc.) because this is one of those situations where you can get a different answer every time you ask the question!
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