Employer Shared Responsibility Tax – Special Considerations for Educational
Be aware!!!! Not all employers are created (or tracked for that matter) equally under the
Employer Shared Responsibility tracking requirements. The proposed Employer Shared Responsibility Tax regulations recognize the unique characteristics of educational organizations. Specifically, that those employees of educational organizations often have long breaks in service due to the calendar makeup of an educational organization (i.e. summers off). Due to this, the Affordable Care Act regulations contain an averaging rule for educational organizations (that does not exist for your average employer), recognizing that the calendar for these organizations typically includes extended break periods when classes are not in session and employees perform no services.
The regulations define “employment breaks” as a period of at least four consecutive weeks when an employee of an educational organization is not credited with hours of service. The averaging rule is designed to prevent these periods from artificially reducing an employee’s average hours of service during a Measurement Period which could impact an employee’s classification during an associated Stability Period.
The employer can neutralize the effect of employment break periods in either of two ways: · the employer can determine the employee’s average hours of service by excluding any employment break period occurring during the Measurement Period and applying that average for the entire Measurement Period, or · the employer can impute hours of service for the employment break period at a rate equal to the average weekly hours of service for weeks that are not part of an employment break period.
This is an added element to the complexity that already exists with the required Measurement, Administrative and Stability periods. Due to the added complexity, trusted advisors, benefits professionals and educational organizations must apply unique criteria and have different tracking procedures in place to adjust for this averaging rule.
To maximize their success in these complex times, educational organizations need to be looking to their advisors, developing comprehensive plans and seeking solutions.