Hour Bank is an over-charge of monthly benefits premiums. By creating a surplus reserve of premium payments, the employee can use their Hour Bank to cover the cost of benefits when they are not working.
By calculating fringe contributions in this manner, as opposed to a straight monthly premium, employees can easily see the status of their benefits contribution funding based upon the number of hours per month (i.e. 130, 140 or 150) they have worked.
By limiting payments for medical benefits to periods when an employee is working an Hour Bank can reduce employee benefit costs.
Under an Hour Bank plan, an employee becomes eligible for insurance coverage by accumulating the minimum required hours of work credit. If, for example, eligibility for benefits is based on working 130 hours per month, each 130 hour increment of work credit provides one subsequent calendar month of benefit for the employee (and dependents if family coverage is elected). Contributions will occur as long as the minimum hours of work credit in the Hour Bank is maintained.
Once the employee has completed the necessary 130 hours work credit, the employee will be covered effective the 1st day of the following month. For employers not currently offering health there is a two (2) month waiting period (i.e. if contributions started September 1st, coverage would begin November 1st).
Employees may accumulate hours of work credit for excess hours worked (i.e. an employee worked 160 hours in a month, the employee will accumulate an excess of 30 hours of work credit for that month (160 hours worked minus 130 hours required equals 30 hours excess credit toward future coverage).
If an employee falls below the required amount of hours of work credit, they will receive a COBRA notification and may exercise their COBRA rights, if desired. Once the minimum required hours have been reached again, the employees benefits will resume the 1st of the following month. Upon termination of employment, any remaining hours may be used to offset COBRA premiums, if elected, or the employee may request a cash refund in writing. All refunds are subject to income tax and they will receive a 1099 at the end of the calendar year.
The current economic climate magnifies the ongoing issue of contractors paying medical insurance premiums for employees as though they were working full-time when they are working reduced hours. Hour Bank administration solves this issue.
Under this methodology, premiums are paid on a retrospective basis. The traditional method pays premiums at the beginning of the month with no way of knowing how many hours an employee will, in fact, work during that month. As a result, an employer is either over or under paying in the month. The Hour bank method remedies that situation and has the added benefit of reconciling monthly premium to an hourly rate for compliance purposes when doing prevailing wage work.
From an employer perspective:
From an employee perspective: