ACA Educational Organizations and the ACA: Unique Industry, Singular Regulations

There are many nuances that define an educational organization. From professors, adjunct professors, student employees, maintenance staff and personnel at museums run by universities, defining who is an employee and how the Affordable Care Act (ACA) applies to them can be a maze. Figure in that public and private K-12, universities, tax-exempt organizations and more fall under the designation of educational organizations and there is a seemingly endless number of potential twists and turns in determining ACA requirements. 

Yet with such a wide range of organizations represented and people employed, it is critical these institutions understand the ACA regulations they must follow. Because failure to meet ACA Employer Mandate obligations could be costly. 

 

Definitions

To begin, there must be an official definition of both educational organizations and employees as they relate to the ACA. Primary, secondary, preparatory or high schools, colleges and universities all qualify as educational organizations, including federal, state and other public-supported schools. Universities that operate museums qualify as educational organizations while museums operating schools do not necessarily qualify under the ACA’s definition. 

When looking at educational organizations through the lens of the ACA employer mandate, full-time and part-time employees are included. From professors, maintenance and administrative staff to adjunct professors, they all have varying ACA coverage requirements. Any special rule applicable to educational organizations apply to employees of these entities and are not solely limited to educators. 

Students employed under federal and state work study programs are excluded from the ACA and need not be measured nor offered coverage. However, ACA regulations do apply to students who are legitimately employed by the educational institution. 

The impacts of unionization on ACA Obligations

Nearly 70 percent of public school and university educators indicate they are in a union. Educational organizations are subject to ACA requirements regardless of union contracts. Most of the time, a union will push for benefits above and beyond the requirements of the ACA. However, if a union falls short of requiring the minimums set forth in the ACA, that does not excuse the educational organization from ACA obligations.

 

Four of the Top ACA-related specifics that educational organizations should know about

Educational organizations are like all other applicable large employers, but, in many ways, are in a class of their own. Four distinct issues educational organizations must focus on regarding the ACA include the following: 

1. Identify full-time and variable hour employees. Educational organizations are explicitly prohibited from taking into account the potential for, or likelihood of, an “employment break period” in determining future hours of service.
   In other words, educational organizations cannot base their full-time/variable hour determinations only on the number of hours an employee is expected to work over a 12-month period. Instead, they must base their determination on the average number of hours the employee will work over the periods of time they have active hours.
    

2. When determining creditable hours of service for adjunct faculty, an educational organization is not allowed to use only in-class instruction time. Federal regulations require that all “hours that are necessary to perform the employee’s duties, such as class preparation time” are included.
    

3. Educational organizations cannot treat a returning employee as a new hire unless their break in service was at least 26 weeks. By contrast, non-educational employers can designate a returning employee as a “new hire” for the purposes of determining coverage eligibility if their break in service was at least 13 weeks.
    

4. Last, and very importantly, “employment break period” is a term that applies only to educational organizations. It refers to a period of four or more weeks during which an employee is not credited with any hours of service. Special unpaid leave such as jury duty, military leave and the Family and Medical Leave Act (FMLA) cannot be included when measuring an employment break period. 

Determining full time employees

As mentioned above, for purposes of the ACA, educational organizations must determine full-time employees based on hours worked during months of active employment. For example, if an employer’s measurement period is 12 months: 

• Non-educational employees calculation
  Total credited hours worked ÷ (52 weeks – weeks of special unpaid leave) = weekly average
   

• Educational employees calculation
  Total credited hours worked ÷ (52 weeks - weeks of special unpaid leave – weeks of employment break periods*) = weekly average

*NOTE: An educational organization is not required to count more than 501 hours toward the employment break period for purposes of determining weekly average hours. 

Full-time employees need to be offered coverage by the first day of the fourth month to comply with the ACA. Part-time employees will be measured under the variable hour employee rules. Those who measure full-time in their initial measurement period or standard measurement period must be offered coverage by the start of the applicable stability period to help comply with the ACA. 

Reduce the denominator, a calculation to determine ACA eligibility:

Educational organizations have the ability to calculate ACA eligibility in two different ways: 

• By either imputing average weekly hours as additional credited hours of service during breaks

 OR 

• By reducing the denominator by the length of an employment break period 

For example: Total credited hours worked + (average weekly hours x weeks of employment break period) ÷ (52 weeks – weeks of special unpaid leave) = weekly average

Alternatively, eligibility can be calculated as follows: 

• Total credited hours worked ÷ (52 weeks – weeks of special unpaid leave – weeks of employment break periods) = weekly average

• This equation calculates eligibility by reducing the denominator by the length of the employment break period up to 501 hours. 

 

Special circumstances could be subject to additional furnishment and filing requirements

In addition to federal regulations that educational organizations must adhere to, if an employee resides in (or in the case of the District of Columbia, resides or works in) a state with an individual mandate, their employer will be subject to additional furnishment and filing requirements. This can be important for organizations holding online classes and those with remote employees. 

Applicable states and districts include: 

• California

• Washington, D.C.

• Massachusetts

• New Jersey

• Rhode Island

• Vermont has an individual mandate, but there are no filing or furnishment requirements currently in place. 

 

Penalty possibilities on the scale of large employers

While educational organizations can seem like islands when navigating ACA requirements, they face the same penalties as all applicable large employers if they do not comply. 

Monetary penalties can be assessed for failing to offer coverage to 95 percent of full-time employees, failing to offer affordable coverage to any benefits eligible employee, and late or failure to file penalties. It pays to meet your ACA obligations. 

 

How Equifax Workforce Solutions can help

The breadth, scope and unique employee classification structure of educational organizations can make for a maze of regulations to navigate to meet ACA requirements. Equifax Workforce Solutions can help human resources specialists in the educational realm meet the challenge with innovative technology solutions. We can also help you communicate with your C-suite to help them better understand the complexities and risks around ACA regulations. Check out our guide to kick off the conversation to gain support from your C-suite.

 

Contact Equifax Workforce Solutions now to discover how we can help set your educational organization up for success. 

---

The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.