How employers with 2 to 50 employees can offer benefits to part-time staff

The ACA employer shared-responsibility rules apply to applicable large employers. A company that averaged fewer than 50 full-time employees, including full-time equivalents, in the prior calendar year is generally not an applicable large employer, and is not required to offer health coverage to anyone. Even for an applicable large employer, the shared-responsibility offer is about full-time employees; offering coverage to part-time employees is not required to avoid those IRS payments, and a part-time employee's premium tax credit does not trigger one. That is a minimum, not a ceiling. See Do employers under 50 have to offer health insurance?.

This page is for employers. It is not a guide for a part-time worker shopping for an individual policy, and it is not tax, legal, or insurance advice.

How part-time hours count toward the 50-employee line

For applicable-large-employer purposes, the IRS treats a full-time employee for a month as an employee who averages at least 30 hours of service per week, or at least 130 hours of service in the month. People under that line are not full-time for the mandate. Their hours still count.

Full-time equivalents are a conversion of non-full-time hours: add the hours of service of all non-full-time employees for the month (capping each person at 120 hours), then divide by 120. Add full-time employees and full-time equivalents for each month, add those monthly totals, divide by 12, and drop any fraction. If the result is 50 or more, you are an applicable large employer for the next calendar year.

Part-time hours can push a company over the line even when fewer than 50 people work 30 hours a week. Related companies under Internal Revenue Code § 414 are generally combined for the test. The IRS publishes worked examples of this math. Offering coverage does not change the count. The count is based on hours of service.

If hours vary from month to month, the IRS regulations describe measurement methods used to determine full-time status. That method is technical. If you have variable-hour staff, we will flag it, and your advisor should apply the regulation to your workforce.

Offering part-time staff a group plan

If you use SHOP coverage, HealthCare.gov requires you to offer coverage to all full-time employees, generally those who work 30 or more hours per week. You do not have to offer it to employees who average fewer than 30 hours per week, or to seasonal workers. You may offer it to part-time employees if you choose.

If you use a fully insured small-group plan that is not SHOP, or a level-funded plan, the carrier's eligibility rules and your plan document control who may enroll. Federal HIPAA rules allow a group health plan to treat full-time and part-time employees as separate groups of similarly situated individuals when the classification is a bona fide employment-based classification, consistent with the employer's usual business practice, and is not directed at individuals based on a health factor. We will read the policy and the plan document before you announce an offer to part-time staff.

A group health plan may not apply a waiting period that exceeds 90 days for an otherwise eligible employee. A shorter waiting period is allowed. The hours threshold you use inside the plan — whether it tracks the federal 30-hour line or a different internal definition — should be written down and applied consistently.

Using an ICHRA for a part-time class

Part-time status is a permitted ICHRA employee class under the IRS and Department of Labor final rule. That means you can offer a traditional group plan to full-time employees and an ICHRA to part-time employees, or an ICHRA only to the part-time class, as long as you follow the same-terms rule inside the class.

If you also offer a traditional group plan to another class, federal minimum class-size rules can apply to the HRA class. For an employer with fewer than 100 employees, that minimum is 10 employees in the HRA class. Those size minimums do not apply if you do not offer a traditional group health plan to any employees.

Contribution amounts can differ by class. They cannot differ person-by-person inside the class, except for the allowed age and dependent adjustments. This is often a clean way to put a defined contribution in front of people who work fewer hours, without putting them on the same group plan as full-time staff.

You generally must give written notice at least 90 days before the plan year begins. Employees who become eligible for an ICHRA can have a special enrollment period to buy individual coverage. Details are on the ICHRA page.

QSEHRA and part-time staff

A QSEHRA generally has to be provided on the same terms to all eligible employees, but Internal Revenue Code § 9831(d) and IRS Notice 2017-67 allow you to exclude part-time or seasonal employees. You may also include them. If you include them, the same-terms rule still applies.

For this exclusion, Notice 2017-67 uses the meanings in Treas. Reg. § 1.105-11(c)(2)(iii)(C):

• Employees whose customary weekly employment is less than 35 hours may be treated as part-time if other employees in similar work have substantially more hours.
• Any employee whose customary weekly employment is less than 25 hours may be considered part-time.
• Seasonal employees are those whose customary annual employment is less than 9 months, if others in similar work have substantially more months, and any employee whose customary annual employment is less than 7 months may be considered seasonal.

That is a different "part-time" definition from the ACA's 30-hour full-time line used for applicable-large-employer status. We will not mix the two tests in the plan document.

A QSEHRA is available only if you are not an applicable large employer and you do not offer a group health plan to any employees. Compare the two reimbursement designs on ICHRA vs QSEHRA.

Voluntary and ancillary benefits

Dental, vision, life, and disability can be offered to part-time staff whether or not they are on the medical plan, subject to the eligibility rules in those policies. Some employers contribute. Others offer the coverage as a voluntary benefit the employee can buy through the group.

These lines are also useful when medical coverage is an ICHRA or a QSEHRA, because they are issued as their own policies and do not have to travel with the individual medical plan an employee selects. A QSEHRA, however, is not available if you offer a group health plan to any employees, so whether a particular dental or vision arrangement is a "group health plan" for that test should be confirmed before you adopt both. Employee contributions for eligible group dental or vision premiums can often be taken pre-tax through a Section 125 premium-only plan, when the cafeteria-plan rules allow it.

How we help you write the offer

We will take your roster, actual hours, and the states where people work, and we will recommend who should be eligible — and under which structure — rather than copying a full-time-only rule by habit. The recommendation will cover:

• Whether part-time staff belong on the group plan, in a part-time ICHRA class, in a QSEHRA you choose not to exclude them from, or on ancillary coverage only
• The hours definition that belongs in the document, and which federal test it is using
• Contribution, waiting periods, and the employee notice the chosen structure requires
• How part-time hours affect the applicable-large-employer count, so a growing roster does not surprise you at year-end