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 IRS Issues New Ruling on Adjunct Faculty and Health-Care Law 

1/9/2013

Dear Colleague:

The Internal Revenue Service (IRS) has just published a notice of proposed rulemaking (NPRM) that addresses some aspects of the treatment of adjunct faculty for the purposes of the Patient Protection and Affordable Care Act (PPACA). Of overriding interest to AACC members is under what conditions adjuncts might be considered full-time employees (FTEs) and therefore entitled to coverage under the PPACA’s employer mandate. AACC wrote to you on this topic late last year. This communication is AACC’s best effort to provide members with useful and relevant information. It is not legal advice or a substitute for legal counsel and should not be construed as such.

Under the PPACA, all employees, including adjuncts, are to be classified as FTEs if they provide 30 hours of service a week, on average. An hour of service includes time when an employee is being paid for work or paid for time off. The IRS has approved the following methods for calculating hours of service: (1) tracking actual hours, (2) crediting 8 hours of service for each day the employee works at least 1 hour, or (3) crediting 40 hours of service for each week the employee works at least 1 hour.

The IRS regulation acknowledged that many educational institutions do not track hours for adjunct faculty, but it did not provide definitive guidance regarding alternate methods to determine in what circumstances adjunct faculty, given their particular circumstances of employment, might be considered FTEs. Instead, the NPRM states that the IRS expects to issue additional regulatory guidance concerning the treatment of adjunct faculty and solicits further input on the issue. AACC will be submitting comments on this issue, along with continuing its less formal communication with the IRS. That said, the ongoing lack of clarity is disappointing.

In the meantime, the NPRM, and particularly its preamble, outlines some considerations that institutions will likely want to take into account in implementing this aspect of the PPACA. Specifically, and critically, the preamble states that until the IRS issues further guidance about how adjunct faculty’s hours of service are to be measured, colleges must use a "reasonable method for crediting hours of service that is consistent with the purposes of [the PPACA’s employer health coverage mandate]."

Given the number and diverse nature of community colleges, individual institutions will, in all likelihood, use different approaches for determining what is reasonable. One possible approach was mentioned in AACC’s last communication on this topic and has been suggested to the IRS by AACC, along with other organizations. It is to treat adjunct faculty who carry a workload that is three quarters or more of that of a full-time faculty member (as defined by the institution or department), as full-time. All aspects of a full-time member’s responsibilities would be taken into account. This approach for determining whether an adjunct faculty is full-time has the virtue of reflecting the fact that faculty are often compensated, and indeed categorized as full-time, on the basis of the courses or credit hours they teach along with other corresponding responsibilities. In part, this is done because of the practical obstacles of documenting the actual time that faculty put into teaching, broadly defined. In the NPRM the IRS acknowledges this suggested approach but neither approves nor rejects this approach; each institution would need to determine if it is reasonable in its circumstances.

At the same time, institutions will probably want to keep in mind that the hours of service remains the basic unit of measurement under the PPACA. Using an approach that relies solely on hours of service would be a surefire way of eliminating any ambiguity about the status of adjunct or other faculty for the purposes of the PPACA. However, while some colleges do have contracts or other arrangements that delineate specific hours that adjuncts are assumed to work, many do not. Furthermore, most institutions do not count hours for faculty in any context outside of the classroom.

Importantly, the NPRM states: “A method of crediting hours would not be reasonable if it took into account only some of an employee’s hours of service with the effect of recharacterizing, as non-fulltime, an employee in a position that traditionally involves more than 30 hours of service per week. For example, it would not be a reasonable method of crediting hours ... in the case of an instructor, such as an adjunct faculty member, to take into account only classroom or other instruction time and not other hours that are necessary to perform the employee’s duties, such as class preparation time.”

As indicated above, the IRS states that a method of crediting hours to employees will not be reasonable if individuals currently being treated as FTEs are reclassified as non-FTEs for the purposes for the PPACA. This is not contemplated in the approach suggested above, and we do not believe that such an approach would materialize on AACC members’ campuses.

We encourage institutions and other parties to consult legal counsel or other experts as they implement the PPACA. Given the somewhat unclear situation involving implementation of the PPACA, it is important as a first matter that institutions simply make sure that they are doing what they can to comply with the new requirements and have a conscious strategy.

This brief update is designed to foster consideration of some of the relevant issues for members but does not delve into the intricacies of the PPACA, and, again, is not formal guidance of any kind. We welcome your input on this issue, and will continue to provide you with updates.

Contact Information

David Baime
AACC Senior Vice President for Government Relations and Policy Analysis

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