address recent questions we have received about the employer shared
responsibility provisions and final regulations.
Do the final regulations include
look-back rules for employers to use in determining their full-time employees?
Yes. The final regulations retain the optional
look-back measurement method from the proposed regulations. The final regulations do not fundamentally
change or simplify the look-back measurement method but do make changes to
certain requirements. For example, the
final regulations retain the look-back rules that apply to “ongoing employees”
and the look-back rules that apply to new “variable hour” or “seasonal
employees.” The final regulations also create
a new category of employee – “part-time” – for a new employee who is reasonably
expected at his/her start date to not be a full-time employee and is not a
variable hour or seasonal employee. The look-back
rules that apply to new variable hour and seasonal employees also apply to new
What is the definition of seasonal employee for
purposes of applying the new employee look-back rules?
regulations define the term seasonal employee as an employee in a position for
which the customary annual employment is six months or less. The preamble notes that the period of
employment should generally begin in the same part of the year each year, like
summer or winter, and an employee can still be considered seasonal if the
employment period extends beyond its customary duration – like ski instructors
during a long snow season.
What alternative measurement
methods are available to an employer that chooses not to use the look-back
The proposed regulations included optional look-back
rules but did not specify how an employer is to determine full-time employee
status if it decided not to use the look-back method. The preamble to the final regulation states
that, pursuant to the statute, employees for whom a look-back method is not
being used must be identified based on actual hours of service for each
calendar month. The final regulations
call this method the “monthly measurement method” and provide some rules on
this determination. In general, this
method requires an employer to count an employee’s hours during a particular
month to see if the employee was full-time (i.e., had an average of at least 30
hours of service per week) for that month. It is unclear how this method would apply in
practice for employers that have employees who work full-time hours one month
and non-full-time hours the next month. It
seems likely that the IRS intended for the monthly measurement period to be
used more as an “after the fact” method to calculate excise tax liability
rather than as a plan design method.