By: HUB’s EB Compliance Team
Last year, we wrote about practical tips for classifying summer interns to avoid Affordable Care Act (“ACA”) employer mandate penalties. What happens if your intern does so well that you want to hire him or her? The answer depends on how you treated the intern when they were hired. (For background on the ACA employer mandate and how the IRS views interns generally, see our prior article here.)
Option 1: Full-time intern hired into full-time position
If the intern was full-time at the time of hire (generally, expected to average at least 30 hours per week), then you should have offered coverage already (except in the rare case where the intern meets the ACA definition of “seasonal employee”, as discussed in our prior article). If you did, then you’re done! There’s nothing else to do.
Option 2: Full-time intern hired into part-time position
Maybe the intern is going back to school and cannot work full time. Let’s say you offered coverage, but now the intern is moving into a part-time position. The answer here is that you would treat him or her like any other full-time to part-time employee. If this move would make the intern ineligible for the plan, then the answer may be complicated. We deal with that in detail in this prior piece.
Option 3: Part-time, variable hour or seasonal intern hired into full-time position
If an intern goes from part-time or seasonal to full-time, then he or she must be offered coverage no later than the first day of the fourth full calendar month following the move to full-time. For example, if an intern was hired as a part-time or seasonal intern on June 1 and is hired into a full-time position on August 15, he or she would need to be offered coverage by no later than December 1.
Note that this assumes the intern has not been employed for an entire standard measurement period. If he or she has, then the answer is slightly different. For the remainder of the existing stability period, the former intern can continue to be treated as part-time or full-time depending on his or her hours in the prior standard measurement period. However, once the next stability period starts, he or she would need to be offered coverage. For more information on measurement and stability periods, see this article.
Option 4: Part-time, variable hour, or seasonal intern hired into part-time or variable hour position.
This is basically a continuation of the intern’s prior position, just without the “intern” label. In this case, you should keep measuring hours, just as you would have if the employee had been hired as a regular, non-intern employee from the beginning.
A few caveats
The examples assume that all the interns are paid. When unpaid interns are hired into paid positions, they are generally treated likely newly hired employees. As a result, there would not typically be any transition issues.
Additionally, the examples assume that the employer uses the same measurement and stability periods for all of its employees. If the employer uses different measurement and/or stability periods for different groups of employees, then the analysis gets more complex.
The examples also assume full-time employees are eligible, but part-time, seasonal and variable hour employees generally are not (unless they average 30 hours per week under the employer mandate measurement rules).
Finally, the examples assume that all eligible employees have the same waiting period. As we discussed here, some employers who do not have a 90-day waiting period may impose a 90-day waiting period on interns only. This may be permissible, but care should be taken any time a particular employee group is singled out as it may raise discrimination and other concerns. Imposing a waiting period also creates additional complexities when the intern is hired on.
NOTICE OF DISCLAIMER
The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.