Recent Congressional Action Evidences Intent to Amend Large Employer Definition and Hourly Requirements under PPACA

Cut Red TapeRecent Congressional Action Evidences Intent to Amend Large Employer Definition and Hourly Requirements under PPACA

MAY 9, 2013

In recent weeks, Congress has demonstrated an intent to change certain definitions and thresholds under the Patient Protection and Affordable Care Act (PPACA). On March 22, 2013, Senator Susan Collins (R-ME) submitted Amendment 144, which would change the definition of a large employer and remove the 30 hour requirement to be considered a full-time employee under PPACA. The legislative amendment would apply to the Senate Fiscal Year 2014 Budget Resolution (S. CON. RES. 8). The amendment aims to establish a deficit-neutral reserve fund to restore a “sensible definition” of a full-time employee under PPACA.  It was adopted by the Senate in a voice vote.

The amendment would repeal the 30 hour requirement to be considered a full-time employee, and would remove full-time equivalent employees from the total to be considered a large employer. Currently, both full-time and full-time equivalent employees are included in an employer’s calculations to determine if the employer is subject to the employer shared responsibility requirements. Employers with 50 or more full-time employees, or a combination of full-time and full-time equivalents, are subject to the shared responsibility provisions. The amendment would change this requirement so that only full-time employees would be counted in the calculation.

Senator Collins argued that the 30 hour requirement to be considered a full-time employee was “creating a perverse incentive where employers are actually reducing the number of hours their employees work in order to keep under that 30-hour threshold and thus avoid penalties.”

Additionally, on April 10, 2013, Senator Collins introduced Senate Bill 701, the “Forty Hours Is Full Time Act of 2013.” The bill would increase the threshold to be considered a full-time employee from 30 hours to 40 hours worked per week.  In addition, the bill would amend the calculation method for determining the number of full-time equivalents. Specifically, instead of dividing the total number of hours of service of employees who are not full-time by 120, the bill would divide the figure by 174 to calculate an employer’s number of full-time equivalents.

Some believe that Senator Collins introduced Senate Bill 701 because it stands a greater chance of becoming law. The earlier Amendment that she sponsored would only take effect should the budget as a whole be passed by Congress, an outcome that seems unlikely at this point.

Senate Bill 701 has been referred to the Senate Committee on Finance. Both houses of Congress will have to agree to the bills before they will be passed into law. Whether this will happen remains unclear.  We will keep you posted of Congressional action on the bills.

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