Do Employers Need to Offer Their Abroad Employees Coverage per the ACA?
Employers who have employees represented globally outside of the United States can face certain challenges in compliance with the Affordable Care Act (ACA). U.S. citizen employees working abroad and being paid from foreign sources, their employers may not be subject to ACA regulations. Any employer in the U.S. who has at least 50 full-time employees is subject to section 4980H of the Employer Shared Responsibility provisions. An employer who has employees domestically and stationed abroad, the analysis depends on the location of the hours of service and source of employee compensation.
When an employer determines whether or not they need to offer coverage to an employee stationed abroad, they should research the number of hours worked and the income source for the hours of service. Employers can exclude any hours of service performed for an abroad employee to an extent that the related compensation comes from a source outside of the U.S., no matter what their citizenship is. If the employee’s income comes from a U.S. source, hours of service must be included for the purpose of determining whether or not the employee is covered under the employer’s mandate. Employers should refer to a qualified tax advisor in determining whether or not income can be derived from a domestic or foreign source.
Any employee that shifts from a domestic to foreign employer can be treated as terminated if the transfer is presumed to last for at least 12 months, and if the employee’s pay will come from a foreign source. With this result, an employer does not have to offer coverage to the employee and will not be subject to any penalties. After the 12 months, if the employee wants to transfer back to the U.S. employer company, they will qualify as a new employee. Whether or not they must be offered coverage will be decided by the rules for all new employees.
While tracking employee hours of service for individual employees can be taxing for global employers, penalties for failing to offer coverage to employees can be costly. If one has employees working abroad, they should take the time and do an analysis on whether they can receive coverage or not.
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