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The Affordable Care Act: Key Terms You Need to Know

ACA got your tongue? Don’t worry if you’re feeling a little overwhelmed about the Affordable Care Act. We’ve gathered some important terms you need as you navigate the new law. Employer Mandate The requirement for businesses with over 50 full-time equivalent employees to provide health coverage to full-time employees is often refereed to as the […]

ACA got your tongue?

Don’t worry if you’re feeling a little overwhelmed about the Affordable Care Act. We’ve gathered some important terms you need as you navigate the new law.

Employer Mandate

The requirement for businesses with over 50 full-time equivalent employees to provide health coverage to full-time employees is often refereed to as the “employer mandate” and is officially part of the Affordable Care Act’s Employer Shared Responsibility Provisions.

Full-Time Equivalent

Full-Time Equivalent is defined as the number of total hours worked divided by the maximum number of compensable hours in a full-time schedule as defined by law.

For Example: You have three employees and they work 50 hours, 40 hours and 10 hours per week – totaling 100 hours. Assuming a full-time employee works 30 hours per week, your full-time equivalent calculation is 100 hours divided by 30 hours, or 3.3 FTE.

Full-Time Employee

Full-time employees are those who worked on average, 30 hours or more a week for more than 120 days in a year – or the number of employees you expect to work these hours. If the total number of employees isn’t a whole number, round it down to the nearest whole number.

Part Time Employees

Part-time employees are those who worked on average less than 30 hours per week, but more than 120 days per year. Part-time workers are counted in FTEs and average annual wages.

Variable Hour Employee

A “variable hour” employee is one whose schedule cannot be definitively known in advance. Depending on the length of time they are with your company, variable hour employees may be used to calculate the number of full-time equivalents.

Seasonal Employees

A “seasonal” employee is one who performs labor that, by its nature, is not performed continuously throughout the year and may only be performed at certain times during the year. Seasonal employees do not count in FTEs and average annual wages.

Measurement Period

The measurement period refers to a fixed amount of time that an employer has to track their employees’ hours in order to determine their employment status. Currently, restaurants can choose between a 6-month or 12-month measurement period.

Initial Measurement Period

Each new hire will have their own Initial Measurement Period. A new employee is measured both during the 12-month Initial Measurement Period (which determines FTE status for the subsequent 12-month Initial Stability Period), and during the first standard Measurement Period beginning after his/her hire date. But because of the sporadic nature of hiring in the restaurant industry, it may result in different Initial Measurement Periods for each new hire. It may be as short as 90 days but may not exceed 13 months after the hire date.

Stability Period

The Stability Period refers to a fixed amount of time that employees are provided healthcare coverage assuming they are considered full-time employees. Stability Periods will always follow measurement periods and have to be as long as the Measurement Period but no shorter than six months.

Administrative Period

The admin period should immediately follow a measurement period and is used by employers to notify their managers and make any changes to their employment status before the Stability Period begins. This time is generally set aside for open enrollment and can last up to 90 days.

Of course, there are many more terms and provisions that an employers would need to know to fully understand the entire scope of the law. Check out The Affordable Care Act: 5 Ways Restaurants Can Prepare for more on putting these terms into action in your company.

The materials and information included in this article are provided for reference purposes only. They are not intended either as a substitute for professional advice or judgment or to provide legal or other advice with respect to particular circumstances.

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