One of the challenges of the Affordable Care Act (ACA) facing colleges and universities is that they must offer health coverage to employees who work on average 30 or more hours per week. This raises several issues with respect to adjunct faculty who are typically hired to teach by the credit hour and whose hours are not tracked. The law has “evolved” with various interpretations and proposed regulations since it was enacted in 2010, but “final regulations” recently issued by the Internal Revenue Service (IRS) now provide some greater clarity.
Many schools pay adjunct faculty, part-time athletic coaches, and many others on an other-than-hourly basis and in fact have never tracked the hours of such employees. Now that we have greater clarity, it is clear that determining how best to sort such employees into full-time versus part-time requires some homework first, then some decision-making as to new policies and procedures, and then some administrative diligence. Here are the new rules:
- While schools are required to adopt a reasonable method based on facts and circumstances in determining how many hours an employee works, if the school credits at least 2¼ hours of service for each hour of teaching or classroom time per week, plus all additional hours of service for those required duties outside the classroom (e.g., office hours, coaching, research, and serving on committees), this will be deemed good faith compliance at least until the end of 2015.
- As schools measure the average hours worked by faculty, they may not take into account “employment break periods” of four weeks or more (e.g., a summer break) during which the employee is not required to provide any hours of service. The rules permit either (1) averaging without including these break periods or (2) crediting the break periods with average hours worked outside of the break periods. No more than 501 hours per year are required to be credited for employment break periods in which the individual did not work (although hours may have to be credited for other purposes, e.g., FMLA leave).
- A school may treat a returning individual as a new hire only if the individual has gone at least 26 weeks with no hours of service before returning. Otherwise, the school will have to treat the returning individual as an ongoing employee. However, the 26-week period may be shorter under the “rule of parity,” which states, an employee may be treated as rehired after a shorter period of at least four consecutive weeks during which no hours of service were credited if that period exceeded the number of weeks of that employee’s employment immediately preceding the period during which the employee was not credited with any hours of service. For example, if a new employee taught a two-week seminar and then had, say, a period of ten weeks during which no hours of service were credited, the employer could treat the employee as a rehired employee, if the employee resumed providing services after the ten-week break.
- Other guidance provides rules for the establishment of “measurement,” “administrative,” and “stability” periods during which hours are tracked, calculations are performed, and coverage is offered.
These rules provide greater clarity and are simpler than the limited guidance that was in place before now. Nevertheless, many concerns prevail:
- Is the school still safe in using the 2¼ hour metric for each hour of class time, even though it knows that this is less than the actual time required for one or more individuals?
“Safe” is sometimes a relative term. I note that the 2¼ rule is found only in the preamble to the regulations and is not found in the regulations themselves. Although I anticipate that the Administration would be required to honor this administrative rule of thumb, I do not feel as secure with respect to an individual who clearly averages more than 30 hours per week but is not offered coverage because the school followed the rule. That is, following the guidance from the IRS may not provide full protection against a claim for coverage by an individual.
Clearly, it could take a different amount of time to teach English literature than it takes to teach welding. Furthermore, an adjunct faculty member who has taught the same course for many years very likely spends less time at it than a new instructor. Therefore, my advice is to apply the rule with confidence in those situations that are not close to averaging 30 hours per week, but be aware of those situations that are close. If a school has concerns, it could consider adopting a rule that would offer some or full coverage to those who appear to average 29 or 28 hours of service per week, to ensure that all possible deserving adjunct faculty have been accounted for. Also do not underplay the additional responsibilities assigned to the adjunct faculty member outside of teaching, for example, office hours, coaching, research and/or committee participation.
- What is the best approach for establishing measurement, administrative and stability periods for determining which employees will be offered coverage?
The answer to this question can only come through analysis of the unique facts and circumstances associated with the school. What is the plan year? Are courses taught during the winter break or during the summer? Does the school have many adjuncts that teach only in the spring or only in the fall?
Note that other guidance issued by the IRS provides that a large employer will not be subject to pay or play penalties (otherwise known as “shared responsibility payments”) provided that the employer offers coverage to at least 70% of its full-time employees in 2015. This is a reduction from the 95% that was to apply and that will apply in 2016 and beyond. This provides a better cushion and permits the school to treat 2015 a bit more as a trial run, but schools should be diligent in applying the rules because the substantial penalty does apply in 2015.
- What are other possible approaches to managing the risks and costs of health coverage with respect to adjunct faculty?
Keep in mind that the 2¼ hour rule is only of assistance in 2015 (as far as we know now). If it expires or to the extent that educational organizations are held to greater responsibility in tracking actual hours, here are some approaches which, depending on the circumstances of the school, may be helpful:
Establishing, through manipulating the teaching assignments to adjunct faculty, a large gap between adjunct faculty presumed to average, say more than 32 hours per week and those presumed to average, say less than 28 hours per week;
Expressly building into the teaching contract the fact that the course(s) is/are anticipated to require less than 28 hours of service per week on average;
Requiring the adjunct faculty member to report those weeks in which more than 30 hours of service were spent teaching the course and indicating that if the instructor does not report, then the school will presume that less than 30 hours of service were performed;
Being prepared to offer coverage to adjunct faculty who are reasonably anticipated to perform on average more than 30 hours of service per week; and
Establishing some reasonable monitoring or sampling through tracking certain individuals and/or surveying.
Unfortunately as is often the case, new laws make for new administrative burdens and the ACA is today’s leading example. With careful homework, planning and monitoring, however, the above adjunct faculty issues can be reasonably managed.