ASA Explains the Look-Back Rule

US healthcareEd Lenz, senior counsel of the American Staffing Association, led the staffing industry’s discussions with the Obama administration on the proposed look-back rules for determining the full-time status of temporary employees. Lenz disagrees with a recent post’s characterizations of regulations published by the Treasury Department and the IRS on Jan. 2.   

In The Staffing Stream’s featured post of April 9 (Is the ACA 12-month Look-Back Actually More Like Three Months?), George Reardon asserts that “newly hired temporary employees who start out on full-time schedules (over 30 hours a week) generally can’t be made to wait a year and must be offered coverage starting within 90 days.”

PREMIUM RESEARCH: Staffing Firms’ Plans for Addressing Healthcare Reform

The issue discussed in the post basically involves the distinction made in the proposed regulations between “variable hour” and “non-variable hour” employees, although the post doesn’t use those terms.  Staffing firms can use the look-back for variable hour employees but not for those who are non-variable hour.

The post correctly states that the 12-month look-back can be used for newly-hired employees who are “expected to have erratic patterns of assignments that could keep them below full-time status for the year” (such employees would qualify as variable hour).  It’s also true, as stated in the post, that employers will not be allowed to rely on the expectation that an employee will not work the full 12 months as the basis for classifying an employee as variable hour at the start (it’s not their expected tenure, but their expected work patterns that matter).

But it’s not correct to assume that just because a temporary employee starts out working a full-time schedule, that they generally can’t be treated as a variable hour employees subject to a look-back up to 12 months.  In fact, the proposed regulations support exactly the opposite assumption.

The proposed regulations include specific examples of variable hour scenarios typical of temporary staffing.  In one, the employer expects, at the start, that the employee “will average 30 hours of service per week” for the “first few months.” Another refers to employees likely to be offered assignments that may be full-time for short-terms (“four to five months” according to the preamble).  Both examples reflect what most staffing firms do and fairly represent the work patterns of the majority of temporary employees assigned in the U.S.

The examples reflect Treasury and IRS’s recognition, based on hours of discussion with ASA, that temporary employees, when they do work, generally work full-time (over 30 hours) work weeks. Hence, the mere fact that assignments are full-time at the start would not, as the post  asserts, generally preclude a determination of variable hour status.

The real issue is this: if employees starting out on relatively short-term assignments (four to five months) can qualify as variable hour, at what length of assignment would they be considered non-variable?  In its March 18 comments on the proposed regulations, ASA recommended that the final regulations include a “safe harbor” under which employees assigned by a staffing firm with annual employee turnover of at least 100 percent would be presumptively variable hour. The presumption would not apply to employees who, on their start date, are reasonably expected to work full-time for at least six consecutive months. Such employees would be presumed to be non-variable hour and not eligible for look-back treatment.

The government may not accept our safe harbor recommendation, but even without such a provision, the examples in the proposed regulations — which we have every reason to expect will be included in final regulations — should provide ample basis for treating most new temporary employees as variable hour.

MORE: Howard Dean on Healthcare Reform and the Contingent Workforce

Ed Lenz
Ed Lenz is the staffing industry's chief legal and legislative advocate and one of the nation’s leading authorities on the legal and public policy aspects of staffing. As senior counsel of the American Staffing Association, Lenz advises the association on a broad range of regulatory and policy issues, including the Affordable Care Act.

Share This Post

Related Articles

1 comments
George Reardon
George Reardon

Today’s post by Ed Lenz about ACA’s 12-month lookback rule highlights a point on which we would both agree – that these rules are not as clear as they need to be, especially the rule about newly-hired temporaries. 

 

We would also agree that extreme interpretations of that rule would be wrong.  Staffing firms offering coverage to all full-timers wouldn’t be able to make all new temporaries wait to pass a 12-month eligibility test, but they also wouldn’t have to offer coverage to all new temporaries within 90 days.  My post commented on one of those extremes, saying that sponsoring employers can’t generally (that is, routinely or automatically) make new temporaries wait a year, especially when they start at full-time schedules.  IRS has flatly denied the industry’s request for that kind of across-the-board presumption.

 

The real meaning of the rule will fall somewhere between the two extremes.  The problem for people who actually operate staffing companies is the risk of interpreting the rules too favorably.  If IRS second guesses their decisions about the lookback, they could face employees' claims for benefits and heavy penalties for not offering coverage to at least 95% of their full-time employees – on top of their incremental costs of sponsoring coverage.

 

ASA continues to seek clarity in the final version of these regulations, as well as other improvements in the law’s application to staffing.  Hopefully, many of those suggestions will be accepted.

Trackbacks

  1. […] Ed Lenz, senior counsel of the American Staffing Association, led the staffing industry’s discussions with the Obama administration on the proposed look-back rules for determining the full-time status of temporary employees.  […]

  2. […] American Staffing Association explains a look-back rule for final full-time standing of temps [The Staffing Stream] […]

  3. […] Ed Lenz, senior counsel of the American Staffing Association, led the staffing industry’s discussions with the Obama administration on the proposed look-back rules for determining the full-time status of temporary employees.  […]

  4. […] MORE: Healthcare Reform: ASA Explains the Look-Back Rule […]

  5. […] MORE: The ASA Explains the Healthcare Reform Look-Back Rule […]

  6. […] MORE: American Staffing Association Explains ACA Look-Back Rule […]

Powered by staffingindustry.com ·