How Rehires Impact Affordable Care Act Eligibility Tracking and Reporting

For many employers, it is not uncommon to terminate an employee, only to hire them back a short time later. In such cases when an employee is terminated and rehired, there are different rules under the Affordable Care Act governing whether to treat them as a newly-hired employee, or a rehired continuing employee.

The Rule: The treatment of rehires depends on whether there has been a break-in-service for employer shared responsibility purposes.

Under both the monthly measurement method and look-back measurement method, a full-time employee returning to a previous employer after a break in service of less than 13 consecutive weeks (or 26 weeks in the case of an educational institution) is treated as a “continuing employee” and not a new-hire.

Therefore, based on the continuing employee/new-hire distinction above, how is shared responsibility tracking and reporting handled for each situation?

In the case of a returning employee classified as a newly-hired employee: Employees that return to an employer as “newly-hired” and are not expected to work full-time will commence a new individual measurement period just as if they had not been previously employed with the employer. Furthermore, returning employees that are considered “newly-hired” will not be re-enrolled automatically in their employer-sponsored plan, even if they were terminated and hired again within the same stability period in which they already had coverage.

For example, John is a variable-hour employee who earned coverage during his measurement period for a stability period that spanned from January-December. On February 15, John was terminated from employment. Later that year on October 1, John is rehired by his old employer as a variable-hour employee. In this case, John would not be eligible for coverage under pay or play, and would commence a new individual measurement period on October 1. He would not be classified as a “continuing employee.”

Related Blog: How Employer Waiting Periods Impact 1095-C Completion

In the case of a returning employee classified as a continuing employee: Employees that return to an employer as a continuing employee will fall back into their previous measurement and stability period as if they had never left the employer. An employer, under pay or play, is obliged to offer coverage “as soon as administratively possible” to rehired continuing-employees that qualified for employer-sponsored coverage during the existing stability period. Continuing employees will not be subject to employer waiting periods.

In the case above, had John returned to work for the same employer on May 1 of the same year, as a continuing employee, his employer would be obliged to offer John coverage beginning on May 1. John would not have to go through his employer’s standard waiting period.

Of note, had John declined employer-sponsored coverage in January at the beginning of his stability period, that declination would carry forward through John’s rehiring in May, and the duration of the stability period for which he declined coverage.

What this means to employers: Employers, especially those who routinely terminate and rehire employees, will need to maintain measurement period data for terminated employees in the case that they return to work as a continuing employee.