As a reminder, the employer shared responsibility provisions of the Affordable Care Act (also known as “pay or play”) require applicable large employers (“ALEs”)—generally those with at least 50 full-time employees, including full-time equivalent employees (FTEs)—to offer affordable health insurance that provides a minimum level of coverage to full-time employees (and their dependents) or pay a penalty tax if any full-time employee is certified to receive a premium tax credit for purchasing individual coverage on the Health Insurance Marketplace. But who are “full-time employees” under pay or play?

Determining ‘Full-Time Employees’
For purposes of pay or play, an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week. In addition, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.

Generally, an hour of service means:

• Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and
• Each hour for which an employee is paid, or entitled to payment, for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.

Employer Classification of ‘Full-Time Employee’ Not Determinative
Last summer, the IRS addressed a question from an employee whose employer developed a policy restricting part-time or seasonal employees from working more than 29 hours of service in any week. In its response, the IRS affirmed prior guidance and advised that, assuming the employer is subject to pay or play, an employee in either employer-based classification who works an average of 30 or more hours of service per week during any given month could potentially trigger (or increase the amount of) the employer’s liability for an assessable payment under pay or play for that month.