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A Service of OnQue Technologies, Inc. |
| Counting Employees for COBRA
Purposes |
December 1, 2005
By Scott Haines, President
OnQue Technologies, Inc.
Santa Rosa, CA
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The
following is an excerpt from Questions and Answers from the COBRA Help Desk–Part
I.
Client: Where can I find something in
writing (that is in simple, non-attorney language) that explains what groups
are required to offer COBRA? Am I correct when I tell groups they must offer
COBRA this calendar year if they had 20 or more full-time equivalent employees
for more than 50% of the working days of the prior calendar year? Please
advise.
OnQue: You are generally correct. However, I
agree that it would be wise to provide your clients with a comprehensive answer
to the question of how to count employees. Following is an excerpt from OnQue's
COBRA Tip of July 15, 2003, "IRS Issues
COBRA Revenue Ruling: When small employers receive stock or acquire assets, how
are employees counted for COBRA?":
Employers who had an
equivalent of at least twenty full-time employees on fifty percent of the
business days in the previous calendar year are subject to COBRA. Here are the
basic rules for counting the number of employees when determining if an
employer must offer COBRA benefits:
- All full-time and part-time
employees are counted when determining if an employer had at least twenty
employees in the previous calendar year.
- Part-time employees are counted
as fractions of full-time employees based on the number of hours worked by
full-time employees in that business. For example, if a full-time employee
normally works a 6-hour day, then two part-time employees each working three
hours a day equal one full-time employee.
- Employers may use either a daily
period or a pay period as the basis on which to count these employees. But
whichever period is chosen, it must be used uniformly for the entire
year.
- If the number of employees is
determined on a daily basis, each full-time employee is counted as one
employee. A full-time employee works the number of hours (up to 8 per day, 40
per week) considered normal for that business.
- If the number of employees is
determined on the basis of a pay period, the employer must count the number of
full-time employees working during that period, plus the number of part-time
employees and the hours worked by each during that entire pay
period.
- Only "common-law" employees are
counted—not independent contractors, self-employed persons and members of
the board of directors (unless such members are also common-law employees) -
even if these individuals receive employee benefits, such as being covered on
the group health plan.
- Common law employees who are
nonresident aliens must be counted when determining whether an employer is
subject to COBRA requirements.
To determine the full-time equivalent employee count, first sum the hours worked by part-time common law employees, then divide the total by the number of hours required to be considered full-time. Then add the result to the total number of full-time employees. For example, 15 employees are full-time (40 hrs.) and 6 work 20 hours per week. The number of full-time equivalent part-time employees is 3 (120 hours/40); the total number of full-time equivalent employees is 15+3..
Do We Count Union
Employees?
Client: When a company has 5 non-union and
15 union employees, is the company subject to COBRA? I'm asking because the
union employees are enrolled in group health benefits through the union, not
the company.
OnQue: If the company employed an equivalent
of at least twenty full-time employees on fifty percent of the business days in
the previous calendar year, then it is subject to COBRA. That some of those
employees are covered under a different plan has no bearing on the company's
COBRA obligations.
Last reviewed or modified: 02/10/2011
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| Related COBRA Tips |
| Are You Sure You Know the Difference Between Independent
Contractors and Employees? |
| IRS
Issues COBRA Revenue Ruling: When small employers receive stock or acquire
assets, how are employees counted for COBRA? |
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This information is provided by
OnQue Technologies, Inc. for educational purposes only and does not constitute
legal advice. If legal advice or other professional assistance is required, the
services of a competent professional should be sought.
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