The Rule of Parity, as cited from the IRS regulations, is as follows: “For purposes of determining the period after which an employee may be treated as having terminated employment and having been rehired, an applicable large employer may choose a period, measured in weeks, of at least four consecutive weeks during which the employee was not credited with any hours of service that exceeds the number of weeks of that employee’s period of employment with the applicable large employer immediately preceding the period that is shorter than 13 weeks (for an employee of an educational organization employer, a period that is shorter than 26 weeks).”
Employers should note that in order for the Rule of Parity to be used, the period of absence cannot exceed the duration of the employee’s period of employment immediately before the break in service.
Here’s an example:
John Doe works as a dishwasher with a variable-hour schedule at a local restaurant. He has been employed by the restaurant for three years. He was determined to be full-time during his measurement period under the Look-Back Measurement Method and was receiving health benefits from his employer during his corresponding stability period. He left the restaurant to pursue a job as a house painter during that stability period. He returned to the restaurant after 16weeks. When John returned, his employer no longer treated him as a full-time employee. Instead, the restaurant treated him as a new hire and started measuring his initial measurement period under the ACA as allowed by the Rule of Parity.
If John had returned to the restaurant before 13 weeks, rather than waiting to return until after 13 weeks (and in his case 16 weeks), his employer would have had to extend him an offer of health coverage for the remainder of his prior stability period because John was counted as a full-time employee as measured during his prior measurement period. But, because John had left his employment at the restaurant for more than 13 weeks, the restaurant could consider him a new hire under the ACA regulations, despite his three years of previous service.
In this case, the Rule of Parity relieves the restaurant from having to continue to pay John’s health insurance as a full-time employee by taking into account the length of time John was not working at the restaurant.
Whether you’re running a restaurant, staffing agency, healthcare facility, or some other organization, complying with the ACA on your own can be difficult, especially if administering the Look-Back Measurement Method.
Consider outsourcing a third-party expert who specializes in ACA compliance, data consolidation, and analytics to avoid the headache and focus your resources on bettering your business.
ACA is complex, stop trying to place a square peg into a round opening and start thinking outside the current benefit box as one plan does not fit all needs. Thanks to our partners at the ACA Times for their continued ACA regulation updates.