February 11, 2014
IRS Issues Guidance on ACA Coverage for Adjuncts and Students
Today, the Internal Revenue Service (IRS) published a rule containing additional guidance on employers’ obligations to provide full-time employees with health coverage under the Affordable Care Act (ACA). The rule specifically addressed several issues CUPA-HR and our partners at other higher education associations raised with the IRS (see here and here), including methods for determining when adjunct faculty and students are entitled to employer-provided health coverage under the ACA.
While we are still reviewing the rule, we have set forth a summary below of some the provisions that specifically address issues pertinent to higher education employers. The IRS has also provided a fact sheet, with important information about changes in employers’ responsibilities under the ACA for 2015. We encourage you to look at this fact sheet as well as the information below.
You can view a copy of the rule here.
CUPA-HR will provide additional education on this rule to members, so look out for future webinars and resources. In the meantime, the IRS is continuing to refine the guidance in this rule and has invited additional comments. Please let us know your thoughts by emailing email@example.com, as we will be filing additional comments.
Under Section 4980H of the Internal Revenue Code, which was added by the ACA, large employers (those with 50 or more employees) must provide full-time employees with health insurance coverage or possibly face tax penalties. The ACA defines a “full-time employee” as one who works 30 or more hours per week.
Higher education has some unique challenges in this regard. Adjunct faculty, for example, are typically paid for specific academic deliverables (e.g., teaching a course) rather than paid by the hour. Colleges and universities do not track work “hours” for any faculty, and doing so is impractical if not impossible.
On December 28, 2012, the IRS issued a Notice of Proposed Rulemaking (NPRM) and a related questions and answers document on section 4980H. In the NPRM, the agencies acknowledged concerns raised by CUPA-HR and other higher education associations (p. 225), but did not provide any specific guidance on adjuncts, stating simply that employers with such employees “must use a reasonable method for crediting hours of service that is consistent with the purposes of section 4980H.” The NPRM, however, provides little guidance as to what is reasonable, simply noting that it would not be reasonable to “take into account only classroom or other instruction time and not other hours that are necessary to perform the employee’s duties, such as class preparation time.” CUPA-HR and our partners at other higher education associations file comments on the NPRM (see here and here) and over the last year have repeatedly urged the IRS to issue additional guidance.
In today’s rule, the IRS provides more definitive guidance as to what constitutes a reasonable method for calculating adjunct hours. Specifically, the rule states that:
one (but not the only) method that is reasonable for this purpose would credit an adjunct faculty member of an institution of higher education with (a) 2 1/4 hours of service (representing a combination of teaching or classroom time and time performing related tasks such as class preparation and grading of examinations or papers) per week for each hour of teaching or classroom time (in other words, in addition to crediting an hour of service for each hour teaching in the classroom, this method would credit an additional 1 1/4 hours for activities such as class preparation and grading) and, separately, (b) an hour of service per week for each additional hour outside of the classroom the faculty member spends performing duties he or she is required to perform (such as required office hours or required attendance at faculty meetings).
Thus, according to the rule, a college or university could deem an adjunct faculty member who teaches 12 hours in the classroom as having worked 27 hours a week (12 x 2.25). If the institution required the adjunct to hold office hours for 2 hours per week, it would need to credit that adjunct with 29 hours (27 for the 12 classroom hours and 2 for the office hours). If the institution also required an adjunct to attend a one-hour faculty meeting each week, it would need to credit that adjunct with 30 hours (27 for the 12 classroom hours, 2 for the office hours and 1 for the faculty meeting). In other words, institutions must carefully assess all required work outside of the classroom.
The IRS states that while it may issue further guidance on this issue, higher education employers may rely on this formula for calculating adjunct hours at least through the end of 2015. The agency also notes in the rule that “employers may credit more hours of service than would result under the method described in the preceding paragraph and also may offer coverage to additional employees beyond those identified as full-time employees under that method.”
Under the rules, employers may use other “reasonable methods” for crediting hours of service for adjunct faculty. The IRS specifically states in the rule that the example it provides is not the only reasonable method of crediting hours of service and “whether another method … is reasonable is based on the relevant facts and circumstances.” It also notes that some commenters (CUPA-HR was one) asked whether a university could adopt a method whereby a adjunct faculty member would be treated as full-time for ACA purposes only if he or she is assigned a course load that is 75 percent the average course load assigned to full-time faculty members. While the IRS acknowledges in the rule that course loads assigned to other faculty “may be a relevant factor in an employer’s determination of the number of hours of service to be credited to an adjunct faculty member,” it cautions that the method may be difficult to administer as “the course loads of faculty treated as full-time employees may vary considerably.”
CUPA-HR and our partners in other higher education associations expressed concern about ACA application to student employees (see here and here). The IRS acknowledges these comments in the rule and provides the following guidance: