Insurance is purchased many times when it is required; such as owning a home or automobile and is now required under the Affordable Care Act (ACA). Many people want insurance for peace of mind, in the event of an unexpected illness, injury or even death. Health insurance was never intended to cover all expenses.

The ACA (Affordable Care Act) actually requires most Americans to have minimum essential health insurance coverage. This provision of the ACA is called the Individual Mandate (aka Individual Shared Responsibility).  If you do not enroll in a qualified health insurance plan, you will have to pay a penalty in the amount of $695 or 2.5% of your annual income (whichever is greater).  For more information visit healthcare.gov

The Family Medical Leave Act (FMLA) only applies to employers with 50 or more employees. Subject employers must provide eligible employees with up to 12 weeks of unpaid leave during any 12-month period for any of the following reasons:

• Birth and care of the newborn child of an employee;
• Placement of a child for adoption or foster care with the employee;
• To care for an immediate family member (spouse, child, or parent) with a serious health condition;
• To take medical leave when the employee is unable to work because of a serious health condition; or
• A qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty.”

Covered employers must also provide up to 26 workweeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).

Click here for full detail on the Family Medical Leave Act

Click here for the Employee’s Guide to the Family Medical Leave Act (FMLA)

Eligibility for Benefits

Employers are generally required by law to provide certain types of employee benefits, such as family and medical leave, unemployment insurance, and workers’ compensation. An employer also must pay its share of FICA (Social Security and Medicare) taxes.

On the other hand, there is no legal requirement under federal law that employers offer benefits like vacation or holiday pay, sick leave, personal time off, bonuses, or severance pay. Additionally, under current federal law, there is no requirement that small employers offer health coverage. Under the federal Health Care Reform law, large employers—generally those with at least 50 full-time employees, including full-time equivalent employees—may be liable for a “pay or play” penalty if they do not offer affordable health insurance that provides a minimum level of coverage to full-time employees (those averaging at least 30 hours of service per week) and their dependents.

Except for those benefits required by law, employers may generally determine the eligibility rules for employee benefits offered and may, in certain instances, choose to offer different benefits to different employees as long as the basis for those differences is not discriminatory. In other words, the benefits offered may not be determined based on an employee’s age, race, sex, disability, or any other class protected under state or federal law.

Full-Time Employees

Employers typically provide benefits to full-time employees, although benefits may vary somewhat among groups of full-time employees.  A common reason for differentiating between part-time and full-time employees is to distinguish the group of employees who receives company benefits from those who are not eligible, or to provide a way of distinguishing between two sets of benefits for two permitted classes of employees.

Part-Time Employees

Provided that there is equal opportunity for employment within the company, employers generally may have one set of benefits for full-time employees and another set of benefits (or none at all) for part-time employees.

The decision to offer benefits to part-time workers is typically guided by such key areas as budget and retention.

Note: Certain benefits may have specific rules requiring employers to allow part-time employees to participate. For example, under the Employee Retirement Income Security Act (ERISA), a company that offers pension or retirement benefits is generally required to allow those who work 1,000 hours per year or more to participate in the plan. Additionally, individual states may require employers with health insurance plans to define an eligible employee as someone who works a certain number of hours fewer than 40 per week.

Determining Full- or Part-Time Employment Status

The definition of full-time employment may vary based on the particular law at issue. For example, the federal Fair Labor Standards Act (FLSA) does not define “full-time” or “part-time” employment (whether an employee is considered full- or part-time does not change the application of the FLSA). Rather, for purposes of employee benefits, the minimum weekly hours for benefits eligibility are generally determined by an employer’s policy or by the terms of the group health coverage plan the employer adopts. However, for purposes of “pay or play” under the federal Health Care Reform law, an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week (or 130 hours per month).

In determining full- or part-time status, problems may arise when employers fail to recognize and count certain hours worked as compensable hours. With respect to meal periods, for example, an employee who remains at his or her desk while eating lunch and regularly answers the telephone and refers callers is working, and such time must be counted as compensable hours worked. Special rules may also apply to waiting time, on-call time, sleeping time, lectures and other training programs, and travel time. For more information on how to calculate hours worked under the FLSA, please see this fact sheet.

Wage claims and other legal actions frequently arise because employers and employees understand benefits policies differently. In order to avoid such disputes, employers are advised to establish clear written policies defining what constitutes full- or part-time employment and the effect of that status on eligibility for benefits. Additionally, if there is any question as to whether a particular employee is entitled to benefits, the employer should consult with knowledgeable employment law counsel.

Casual Employees

It is common for employers in certain industries such as healthcare to hire employees who typically work less than 20 hours per week.  Typically, employers do not provide such casual employees benefits.

Independent Contractors

Independent contractors are a popular way to complete a particular project by hiring a specialist in a certain area rather than a full time employee. Independent contractors generally are not eligible for benefits from an employer.

A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.

A qualified benefit is a benefit that does not defer compensation and is excludable from an employee’s gross income under a specific provision of the Code, without being subject to the principles of constructive receipt. Qualified benefits include:

• Accident and health benefits (but not Archer medical savings accounts or long-term care insurance);
• Adoption assistance;
• Dependent care assistance;
• Group-term life insurance coverage;
• Health savings accounts, including distributions to pay long-term care services.

The written plan must specifically describe all benefits and establish rules for eligibility and elections.

A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable. A plan offering only a choice between taxable benefits is not a section 125 plan.