Maintaining ACA Compliance When Hiring a Former Employee

There are many advantages to bringing back former employees, but applicable large employers need to follow the Affordable Care Act (ACA) rules when determining when to offer benefits. The key to this is determining whether the employee should be treated as a “new hire” or a “continuing employee.” This determination will tell the employer whether to offer benefits right away or if the designated waiting period applies.

There are three possible scenarios:

  • Employee returns after 13 weeks or more (26 weeks for educational entities): This employee can be treated as a “new hire” and, if the employee is a variable hourly worker or part-time, employers can wait until the end of the designated measurement period to begin offering coverage. If the employee is hired full-time, then the same rules for other newly hired full-time employees would apply.
  • Employee returns after less than 13 weeks (26 weeks for educational entities): This individual is treated as a “continuing employee” and must be offered coverage immediately on the first date of reemployment.
    • The exception to this rule is the ACA’s Rule of Parity. It says that if the returning employee’s employment gap was longer than the period they worked before leaving, they should be treated as a new hire.
    • If the returning employee was eligible before the break in service, but opted not to receive coverage, then the employer may not have an obligation to offer new coverage upon rehire, according to Cafeteria Plan regulations.

  • Employee was in a stability period when they left. If the returning employee was in a stability period when they left, then they should be placed back into the ongoing eligible stability period and offered benefits upon reemployment.

Employers are allowed to be more generous than the ACA employer mandate rules require. The above rules and the employer’s policies should be spelled out in plan documents or other plan communications and should be applied consistently.