Compliance FAQ: Do We Need to Continue Offering Benefits to an Employee Moving From Full to Part-Time?

An employee who regularly works 30 or more hours per week is considered full-time and, therefore, must be offered health coverage by an employer, subject to the employer mandate. If an employee is reasonably expected to work full-time hours, based on determinative factors such as comparable full-time positions, how it was advertised in a job description, etc., the employee should be offered coverage no later than the first day of the fourth month and shouldn’t be placed in a look-back measurement period. In other words, the normal new-hire waiting period would apply and coverage would be effective following the waiting period.

However, if an employee’s hours vary above and below 30 hours per week and there’s no reasonable expectation that they’ll always work full-time hours upon hire, they should be placed in a look-back measurement period. Importantly, employees shouldn’t be moved back and forth from variable hour to full-time just because they start working more or fewer hours.

If an employer is using the look-back measurement method for variable-hour employees and if the employee was determined to be full-time and eligible for benefits during the defined standard measurement period, the employee should remain eligible through the end of the corresponding stability period, regardless of the number of hours worked during the stability period. In other words, when an employee earns full-time status during the measurement period, their status as an eligible full-time employee is essentially locked in for the entire stability period, even if their hours drop below 30 hours per week. This is true even if the employee’s hours drop voluntarily.

In addition, there’s an exception that says if an employee transfers to a position that would have been considered part-time if originally hired into that position, the employer can switch to the monthly measurement period starting on the first day of the fourth full month following the month of transfer, However, this only applies if both of these conditions are met:

1. The employee actually averages less than 30 hours/week for the full three calendar months after the transfer; and
2. The employer has continuously offered minimum value coverage starting no later than the first day of the month after the employee’s first three months of employment through the calendar month in which the transfer occurs.

This means the second condition would only apply if the employee was offered minimum value coverage after their first three months of employment. This condition wouldn’t apply if the employee were offered coverage after meeting the measurement period. Thus, both conditions listed above would need to be satisfied for this exception to apply. If this exception doesn’t apply, the employer would need to offer coverage for the full stability period for which it was determined they were a full-time, eligible employee.

Importantly, though, COBRA must be offered whenever there’s a loss of eligibility and a triggering event. The triggering events include reduction of hours, termination of employment, divorce, death of the employee, and child ceasing to be eligible under the terms of the plan. So, if an employee was previously eligible because they averaged 30 hours or more per week and are now ineligible because they didn’t average at least 30 hours during the corresponding standard measurement period (i.e., at the end of the stability period), then they’ve lost eligibility due to reduction of hours. COBRA would then be offered for the plan that the employee (and covered dependents and spouse) had before the COBRA event.