Yes, an employer can offer benefits to part-time employees as long as the carrier (for fully insured benefits) or TPA and stop-loss carrier (for self-insured benefits) agrees. Employers need to ensure the eligibility criteria are clearly defined, properly documented in plan documents, and effectively communicated to employees. These criteria should explain how part-time hours are calculated to ensure only those who are truly eligible receive an offer of coverage.
For medical coverage, calculating hours and eligibility will depend on whether the employer is an applicable large employer (ALE) subject to the ACA’s employer mandate. Employers subject to the employer mandate must abide by specific rules in place to identify full or part-time employees. While more complex, these rules do help clearly identify full-time versus part-time status, which can then be used to offer medical coverage when applicable. Employers who are unsure as to whether they are considered an ALE should work with their consultant, advisor, or benefits counsel to better understand those obligations. Generally speaking, the ACA’s criteria are different from criteria the employer uses to calculate eligibility under other lines of coverage or even to identify full versus part-time for HR and employment purposes. The employer should ensure that the chosen criteria are clearly documented and communicated to employees.
If an employer extends eligibility to part-time employees, whether for medical coverage or other lines, they can charge different premiums to this group versus full-time employees. Importantly, employers will need to consider nondiscrimination rules, which generally require that a plan should not favor highly compensated employees. We see these rules under both Section 105 and Section 125 of the IRC; Section 105 applies only to self-insured benefits, while Section 125 applies to pre-tax benefits. Generally, employers may vary benefit offerings and employer contributions based on bona fide employment classifications. Bona fide business classifications include those based on an objective business purpose (in other words, there must be a business reason for forming the classification — it can’t be formed solely to divide employees with respect to benefit offerings). Examples of allowable classifications include different geographic locations, offices, business lines, job titles, or hourly work expectations. Other examples include salaried versus hourly, part-time versus full-time, or union versus non-union. Even with a bona fide business class, the variance in employer contribution must not discriminate in favor of highly compensated employees. If highly compensated employees are being favored, then the plan is at risk for discrimination.
Employers that extend benefits eligibility to part-time employees but charge higher premiums should be aware of nondiscrimination rules and undergo testing to ensure the plan is not discriminatory based on the variance. For more information on these rules, please ask your broker or consultant for a copy of the NFP publication Sections 105 and 125 Nondiscrimination Rules: A Guide for Employers.