Per Diem Employees and ACA Mandates

Per Diem Employees

Under the Patient Protection and Affordable Care Act (PPACA), per diem employees are counted as full-time or part-time depending on the average hours of service worked by the employee over the prior calendar year.

Hours of service include:

  1. Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and
  2. Each hour for which an employee is paid, or entitled to payment by the employer on account of 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.

If the per diem rate is based on an hourly rate, the employer should use the actual number of hours of service worked. The employer should calculate the total number of hours worked over the past calendar year, using any six-consecutive-month period. If the average number of hours of service is over 30 hours per week, that employee will be counted as a full-time equivalent employee.

If the per diem rate is based on a non-hourly basis, the employer is permitted to use one of three approaches. The calculation of the employee’s hours should be documented, and based on reasonable good faith interpretations of existing regulations. The three methodologies are as follows:

  1. Count actual hours of service following the same methodology used for employees paid on an hourly-basis;
  2. Use a days-worked equivalency method whereby the employee is credited with eight hours of service for each day for which the employee would be required to be credited with at least one hour of service under the service crediting rules; or,
  3. Use a weeks-worked equivalency of 40 hours of service per week for each week for which the employee would be required to be credited with at least one hour of service under service crediting rules.

The employee need not use the same methodology for counting hours of service for all non-hourly employees, so long as the methodology is reasonably and consistently applied. The one caveat highlighted in the regulation follows, “…these proposed regulations prohibit use of the days-worked or weeks-worked equivalency method if the result would be to substantially understate an employee’s hours of service in a manner that would cause that employee not to be treated as a full-time employee.”

Some commenters had requested specialized calculations for employees who do not work traditional schedules, such as adjunct faculty and airline pilots. In response, the regulation states, “Until further guidance is issued, employers of employees in positions described…must use a reasonable method for crediting hours of service that is consistent with the purposes of section 4980H.”

Another area of concern for the employer in your scenario concerns whether these employees qualify as seasonal employees. Under the regulation, employers are permitted, through 2014, to use a reasonable good faith interpretation of the term seasonal employee. As an example, an employee of an educational organization who works during the active portions of the academic year is not to be treated as a seasonal employee.

In this scenario, the employer should use reasonable good faith interpretations of existing regulations, and document any calculations, of per diem employees.

The views expressed in this response do not necessarily reflect the official policy, position, or opinions of BenefitMall. This response, to the best of our knowledge is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

 

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