The IRS has issued Notice 2012-58, which describes safe-harbor methods employers may use to determine which employees are “full-time” workers for purposes of the “shared responsibility” penalty of the Affordable Care Act (ACA), which is often referred to as Obamacare. Notice 2012-59, issued by the U.S. Department of Labor (DOL) and the U.S. Department of Health and Human Services (HHS), addresses the 90-day waiting period generally required under the ACA. 
The provisions are effective for health plan years beginning on or after January 1, 2014, and at least through the end of 2014, after which the IRS anticipates enacting formal regulations addressing the issues described in the notices.
Shared responsibility
Under the ACA, a “large employer” is subject to a “shared responsibility” penalty if:
- The employer fails to offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential health insurance coverage under an eligible employer-sponsored plan and a full- time employee enrolls in a state healthcare exchange and, because of his income level, is certified to receive a premium tax credit or cost-sharing reduction under the ACA; or
- The employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential healthcare coverage and one or more full-time employees enrolls in a state healthcare exchange and, because of the employee’s income level, is certified to receive a premium tax credit or cost-sharing reduction (generally because the employer’s coverage either isn’t affordable or doesn’t provide minimum value).
Coverage under an employer-sponsored plan is affordable to a particular employee if his required contribution to the plan doesn’t exceed 9.5 percent of his household income for the taxable year. Large employers are companies that employed at least 50 full-time employees, including full- time equivalent employees, on business days during the preceding calendar year. A full-time employee is a worker who is employed, on average, at least 30 hours per week in any month.
Full-time employees
For purposes of determining whether someone is a full-time employee, the IRS categorizes workers as either (1) ongoing employees (a worker who has been employed for a year); (2) new employees reasonably expected to work full-time; or (3) new employees who are variable-hour and seasonal employees. A new employee is a variable-hour employee if, as of her start date, it cannot be determined that she is reasonably expected to work an average of at least 30 hours per week. The notices don’t specifically address how “seasonal employee” is defined, although the ACA generally provides that employers can make a reasonable good-faith determination of the term.
To determine whether employees are full-time initially and in the future and to have sufficient time to enroll full-time employees in the healthcare plan and meet the ACA’s requirements, employers will implement a measurement period (to determine if employees are full-time), an administrative period (to determine whether employees are eligible for coverage and to notify and enroll eligible employees), and a stability period (during which eligible employees are provided coverage). There are limits on how long the time periods may be, which are illustrated in numerous examples in IRS Notice 2012-58.
An employer is required to use the same time periods for ongoing employees and the same time periods for variable-hour and seasonal employees, although you can use different time periods for certain employees, including:
- Collectively bargained employees and those who aren’t covered by a labor contract;
- Salaried and hourly employees;
- Employees of different entities; and
- Employees located in different states.
Waiting period
The ACA also provides that for plan years beginning on or after January 1, 2014, a group health plan or group health insurance issuer will not apply any waiting period longer than 90 days after an employee is eligible for coverage. A plan cannot impose an eligibility condition requiring more than the 1,200 cumulative hours of service before the 90- day period begins. Other conditions for eligibility generally are permissible unless the condition is designed to avoid compliance with the 90-day waiting period.
Bottom line
Penalties for violating the full-time employee coverage rule (the shared responsibility penalty) or the 90-day waiting period can be significant. The shared responsibility penalty can be as high as $3,000 per employee per year, and the penalty for violating the 90-day waiting period is $100 per day during the period of violation (although a minimum penalty of $2,500 can apply in some circumstances).
To avoid a penalty, you should evaluate the effect of the new rules on your health insurance plans. Because of the various time periods for counting hours to determine full-time status specified by the IRS, you also should evaluate your current system for tracking hours worked by employees. 
Michael Bindner is a member of Frost Brown Todd and practices out of the Indianapolis, Indiana, office. He concentrates his practice in the areas of employee benefits, federal and state tax, physician group representation and general business services. He may be contacted at mbindner@fbtlaw.com.