Affordable Care ActThe Basic Facts
Break in Service
(Rehiring After Termination or Resuming Service After Other Absence)
The break in service rules are of particular importance to the entertainment industry, as productions frequently hire, separate and rehire the same individuals throughout the year. What happens if an employee quits, is terminated, laid off or begins an unpaid leave, but is then recalled, rehired, or returns from leave during a measurement period or stability period? There are complex rules applied here to determine if the employee is an ongoing employee or a new hire. The proposed regulations provide the following rules regarding rehired employees or those returning from a leave of absence:
- If an individual has no hours of service for at least 13 consecutive weeks and later returns to work, the employer can treat the individual as a new employee.
- If the break in service is less than 13 weeks, the employer can still treat the individual as a new employee if the break in service is at least four weeks, and is longer than the preceding period of employment. For example, this optional “rule of parity” could apply if an employee works three weeks for an employer, terminates employment, and is rehired by that employer 10 weeks after terminating employment. In this case, the individual may be treated as a new employee.
If an employee is a “continuing employee” upon rehire because a break in service is shorter than 13 weeks (or four weeks in conjunction with an employment period of fewer than four weeks), the ACA measurement and stability periods continue as if the employee’s employment did not terminate. For example, if the continuing employee returns during a stability period in which the employee was being treated as a full-time employee, the employee is treated as a full-time employee upon return and through the end of that stability period. For this purpose, a full-time employee must be offered MEC upon resumption of services.