Dear Reader:
The following document was created from the MTAS electronic library known as MORe (www.mtas.tennessee.edu/more). This online library is maintained daily by MTAS staff and seeks to represent the most current information regarding issues relative to Tennessee municipal government.
We hope this information will be useful to you; reference to it will assist you with many of the questions that will arise in your tenure with municipal government. However, the Tennessee Code Annotated and other relevant laws or regulations should always be consulted before any action is taken based upon the contents of this document.
Please feel free to contact us if you have questions or comments regarding this information or any other MORe material.
Sincerely,
The University of Tennessee
Municipal Technical Advisory Service
1610 University Avenue
Knoxville, TN 37921-6741
865-974-0411 phone
865-974-0423 fax
www.mtas.tennessee.edu
The Patient Protection and Affordable Care Act (PPACA) applies to all public, private, and non-profit employers. On Monday, February 10, 2014, the Internal Revenue Service (IRS) finalized rules clarifying that volunteers in a government or tax-exempt organization are exempt from the Patient Protection and Affordable Care Act (PPACA). This exception is beneficial for the volunteer fire service and for combination fire departments, too.
Hours worked by a volunteer who does not receive (and is not entitled to receive) compensation in exchange for the performance of services are not treated as hours of service for the purposes of the PPACA. The final regulations provide that hours of service do not include hours worked as a “bona fide volunteer.” Bona fide volunteers include any volunteer who is an employee of a government entity or an organization described in section 501(c) that is exempt from taxation under section 501(a) whose only compensation from that entity or organization is in the form of (i) reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of services by volunteers, or (ii) reasonable benefits (including length of service awards), and nominal fees, customarily paid by similar entities in connection with the performance of services by volunteers. The 20 percent rule for nominal fees still applies (see the MORe page [1] on volunteer compensation for additional information on allowable compensation for volunteers).
The definition of volunteer is broad enough to include volunteer firefighters, EMS personnel, CERT participants, Fire Corp participants, and similar members of a fire or emergency services department who volunteer their services. Part-time employees (those who receive an hourly rate) are not considered to be volunteers.
The published rules for Shared Responsibility for Employers Regarding Health Coverage [2] are available from the Federal Register Website.
The PPACA does not require cities to offer health insurance to employees. However, the city will be penalized if there are at least 50 full-time equivalents (FTEs) as defined by the PPACA and the employer does not offer at least minimum credible coverage or if coverage is not affordable as defined by PPACA.
Penalties only apply if an employer has the equivalent of 50 FTEs, including part time and seasonal. Those employers would be penalized if they did not offer coverage that meets the minimum standards as defined by PPACA. There are several ways to determine how part-time employees are counted, and this is done using a “look back” period.
Under the look-back/stability period safe harbor method, an employer determines each employee’s full-time status by looking back at a defined period of not less than three but not more than twelve consecutive calendar months, as chosen by the employer (the measurement period), to determine whether during the measurement period the employee averaged at least 30 hours of service per week. If the employee were determined to be a full-time employee during the measurement period, then the employee would be treated as a full-time employee during a subsequent “stability period,” regardless of the employee’s number of hours of service during the stability period, so long as he or she remained an employee.
Using the look-back period is voluntary. If an employer chooses not to use a look-back period, the employer simply looks at each employee’s actual hours each month and if they worked 30 or more hours they should have been offered coverage. It may be advantageous for a municipality with a workforce that is largely full-time and/or works very predictable hours to use the “count as you go” approach.
For more information on how an employer must define and calculate number of FTEs go to the IRS website at http://www.irs.gov/pub/irs-drop/n-12-58.pdf [3] for IRS Notice 2012-58, Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage (§ 4980H).
A “large employer” is defined as an employer with more than 50 full-time equivalent employees during the preceding calendar year. Both full-time and part-time employees are included in the calculation:
Hours worked by part-time employees are included by, on a monthly basis, dividing their total number of monthly hours worked by 120.
For example, an employer with 35 full-time employees (30+ hours per week) also has 20 part-time employees who all work 24 hours per week (so each employee who works 24 hours per week, works a total of 96 hours per month). These hours worked by these part-time employees are the equivalent of having 16 full-time employees, calculated as follows (note: 120 hours of service in a calendar month is the monthly equivalent of 30 hours of service per week):
The 35 full-time employees, plus the 16 full-time equivalent employees, equals 51 full-time equivalent employees, so this employer would be considered a large employer under the PPACA.
Links:
[1] https://www.mtas.tennessee.edu/reference/compensation-and-employee-status-volunteer-firefighters
[2] https://www.federalregister.gov/articles/2014/02/12/2014-03082/shared-responsibility-for-employers-regarding-health-coverage
[3] http://www.irs.gov/pub/irs-drop/n-12-58.pdf
DISCLAIMER: The letters and publications written by the MTAS consultants were written based upon the law at the time and/or a specific sets of facts. The laws referenced in the letters and publications may have changed and/or the technical advice provided may not be applicable to your city or circumstances. Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this website.
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