What is a service interruption?
A break in service is the loss of benefits when an employee returns to a company more than 13 weeks after leaving and must wait to become eligible again. It is not unusual for an employee to voluntarily or involuntarily leave a job and then be rehired in the future by the same company. However, how the employee’s benefits are handled upon return depends on whether a new hire or a rehire is being considered.
- A break in service occurs when an employee leaves a company for at least 13 weeks but is rehired.
- Employees who return to their previous company within 13 weeks are considered rehired and will receive benefits immediately.
- A returning employee who is considered a new employee must work for a specified period before being eligible for benefits, hence the break in service.
- The “parity rule” says that a rehired employee can be treated as a new employee if the break in service is longer than the period worked before leaving.
- A break in service for pension credit relates to not working enough hours in a given year to maintain previously acquired pension credits.
How a service outage works
The Patient Protection and Affordable Care Act (ACA) defines returning workers as rehired if an interruption in service (the time between the day they left and the day they returned) is less than 13 weeks. On the other hand, employers can designate someone rehired after the 13-week period as a new hire.
It is a great distinction for both employers and employees. Full-time rehires must receive health care coverage immediately because they have already qualified for certain benefits during their previous employment. New hires must start from scratch and work for a designated period before benefits take effect.
How an employer defines a full-time employee is key to enforcing the rehire rule. The IRS says that a person must work at least 130 hours per month, or 30 hours per week to be considered as such. If the employer decides based on the Monthly Measurement Method that a previous employee worked full time and served a prior waiting period, benefits must be reinstated from day one.
However, a returning employee who is considered a new employee can be treated like any other and must work for a specified period before being eligible for benefits.
The adage “there are exceptions to all the rules” also applies to the robbery service. The ACA allows an employer to apply a “parity rule,” which means that it can treat a rehired employee as a new employee if the break in service is longer than the period worked before leaving. In other words, an employee who previously worked for five weeks, one less than eligibility, may be treated as a new employee and must wait to receive benefits.
Types of running in service
Beyond a break in service for benefits, a break in service can also apply to those with pensions. A break in service for a pension occurs if there is a one-year break in service before working for five years. If this happens, the previously acquired years for a pension can be canceled.
Temporary breaks in service related to reasons such as childbirth, pregnancy, adoption of a child or any reason under the Family Medical Leave Act of 1993, do not count. A one-year break in service occurs if during any calendar year the employee does not complete at least 436 hours of employment. A service interruption can be temporary and can be repaired with a sufficient amount of subsequent work.