We have a prospect that came to us with 19 full-time and 10 part-time employees. They have offered COBRA in the past. Are they required to offer COBRA because part-time employees count toward the threshold of 20 employees? If part-time employees count, what is the formula for counting them? What is the previous year’s measurement lookback period to determine going forward if a company should continue to offer COBRA?

Part-time employees count as fractions of employees for the federal small employer exception. The fraction is equal to…

Part-time employees count as fractions of employees for the federal small employer exception. The fraction is equal to the number of hours that the part-time employee works, divided by the number of hours that an employee must work to be considered a full-time employee. Employers may count part-time employees individually or an aggregate basis but must choose one method and use it consistently for all part-time employees and for the entire year.

The small employer exception applies when an employer employs fewer than 20 employees (full-time plus fractional part-time) on a typical business day during the preceding year. A “typical business day” means at least 50% of business days during the prior year. If an employer crosses over the 20-employee threshold during the current year, the plan becomes subject to COBRA the following January 1.