8866 / What constitutes an hour of service for purposes of determining whether an employee is a full-time employee in light of the ACA shared responsibility provisions?

An hour of service is generally each hour for which an employee is paid, or is entitled to receive payment, for the performance of services for the employer. An hour of service also includes any hours for which an employee is paid, or is entitled to receive payment, during a time period where no services are actually performed (for example, because the employee is entitled to paid vacation, paid sick leave, holiday pay, jury duty pay, etc.).

Hours of service do not include hours spent performing services for an employer as a volunteer or pursuant to a federal work-study program (or substantially similar program). To the extent payment for an employee's services comes from a non-U.S. source, the hours spent performing those services are also excluded.

In some cases, an employee may be counted as a full-time employee for purposes of determining applicable large employer status even if that employee is not technically performing his or her job duties. If an employee is receiving short-term or long-term disability benefits, he or she may still be counted as a full-time employee if the employee retains his or her status as an employee and the disability benefits are paid for by the employer. Hours of service will result from employees receiving disability benefits under these circumstances even if the employee is not receiving his or her full compensation (for example, an employee receiving 80 percent of his or her compensation for 40 hours per week will still be credited with 40 hours of service per week, and will thus be a full-time employee). However, if the employee pays for the disability payment arrangement on an after-tax basis, no hours of service will result. Further, if the employee is not working, but is receiving workers compensation benefits, no hours of service will result.