House Committee Approves Bill Defining ‘Full Time’ as 40 Hours under PPACA

NBCH thanks the American Benefits Council for the information provided in this post.

The U.S. House of Representatives Ways and Means Committee reported out the Save American Workers Act (H.R. 2575) which changes the Patient Protection and Affordable Care Act (PPACA) definition of a “full-time employee” from 30 to 40 hours, in a February 4 “mark-up” meeting. The committee approved the measure on a party-line vote of 23-14 (with two Democrats absent).

The PPACA "shared responsibility" employer mandate, which has been delayed until 2015, requires employers with 50 or more full-time (or equivalent) employees to offer health coverage that satisfies affordability and minimum value requirements to their full-time employees or pay a penalty if even one full-time employee receives a premium tax credit for health coverage obtained through an insurance exchange. Under PPACA and Internal Revenue Service Notice 2012-58, "full-time employee" is defined generally as a person who works, on average, at least 30 hours per week.

H.R. 2575, introduced by Representative Todd C. Young (R-IN), would replace the number 30 (hours per week) with the number 40 (hours per week) for purposes of identifying full-time employees, and modify the calculation of full-time equivalent workers by requiring employers to divide the aggregate number of hours of service of employees who are not full-time employees by 174 rather than 120. A similar bipartisan measure has been introduced in the Senate as the Forty Hours is Full Time Act (S. 1188).

The substitute amendment offered by Ways and Means Committee Chairman Dave Camp (R-MI) and approved by the committee makes the amendment effective for months beginning after December 31, 2013. In his opening statement, Camp emphasized that the current 30-hour limit for a full-time workweek puts workers at risk of having their hours reduced. “‘Obamacare’ is putting full-time work and the potential to earn more wages out of the reach of millions of Americans already struggling in these tough economic times,” Camp said.

Young also provided anecdotes of workers having their hours cut to below 30 hours so as to avoid fitting the definition of a full-time employee.

During debate, Democrats warned that an increase to 40 hours could put as many as five times more workers at risk to have their hours cut, and maintained that the 30-hour limit is necessary to achieve broader coverage. Republicans argued that the law negatively impacts businesses by restricting economic growth and hurts already marginalized groups and populations who are most likely to have their hours cut. Thomas Barthold, chief of staff of the Joint Committee on Taxation, answered questions from the panel regarding the economic implications of the proposed legislation but said that the majority of data still needs to be processed and analyzed and promised more information in the coming weeks.

A number of lawmakers cited the February 4 Congressional Budget Office (CBO) report on the effects of PPACA on the labor market, which found that full implementation of the law could result in the loss of 2.3 million full-time jobs by 2021, which “includes some people choosing not to work at all and other people choosing to work fewer hours than they would have in the absence of the law.” This conclusion may stem from the possibility that some people, particularly those at the margins of eligibility for premium tax credits, might conclude that it is more advantageous to accept somewhat lower compensation in return for government subsidies that would enable them to purchase coverage through an exchange.

The bill is now clear for consideration by the full House of Representatives, where strong majority support is expected. The Senate bill has been referred to the Senate Finance Committee, which has not taken action on the measure.