ACA Rehire Rules: 13-Week, Parity, and Penalties

Under the ACA rehire rules, a returning employee is treated as a new hire only if their break in service was at least 13 consecutive weeks (26 weeks for educational organizations), or if a shorter break satisfies the Rule of Parity. Every other rehire is a continuing employee, which means prior hours carry forward, an active stability period still governs coverage, and restarting a waiting period is hard to defend.¹ Getting this call wrong is one of the most common ways applicable large employers rack up shared-responsibility penalties.

The 13-Week Break-in-Service Rule

The baseline is a bright line. If an employee’s break in service runs 13 consecutive weeks or longer, you may treat them as a new hire when they return: prior hours don’t carry over, and a fresh initial measurement period starts.² If the break is shorter than 13 weeks, you must treat them as a continuing employee. There’s no employer discretion in either direction.

Educational organizations use 26 weeks instead of 13. Academic calendars produce long, predictable gaps, and the longer threshold prevents schools from treating every returning teacher or adjunct as a brand-new hire each fall.² A teacher off from mid-June to early September has been gone roughly 12 weeks. That’s well under 26, so the school treats them as continuing.

The Rule of Parity

The Rule of Parity is the escape hatch for short-tenure workers. Even if the break in service is shorter than 13 weeks (or 26 for schools), you may treat the returning worker as new when two conditions are both met:

The break lasted at least four consecutive weeks, and
The break was longer than the employee’s immediately preceding period of employment.²

Two examples make the mechanic clear. An employee works five weeks, is gone six weeks, then returns. The six-week absence is longer than the five weeks worked and clears the four-week floor, so parity applies and you can treat them as new. Compare that to someone who worked 18 months and then took a 10-week break. The break is shorter than the prior employment period and shorter than 13 weeks, so neither rule helps. That person is a continuing employee, and every prior hour carries over.

The four-week floor is doing real work in the regulation. It stops employers from engineering brief separations to reset eligibility for short-tenure staff.

What Continuing-Employee Status Actually Means

Two consequences follow when a rehire is a continuing employee, and both are easy to miss.

First, an active stability period still governs. If you determined an employee was full-time and locked them into a 12-month stability period, and they quit in month four and return in month seven after a break too short to reset, you owe them coverage for the remaining five months of that stability period — even if their new schedule is part-time.³ A manager who sees a former employee coming back at 20 hours a week and assumes no coverage obligation exists has just created an uncovered full-time employee on paper.

Second, prior hours are combined with post-rehire hours when the next measurement period runs. You do not get to start the hours count from zero. If the prior stability period expired during the break, a new measurement period begins at rehire, but the pre-break hours still feed into it.

Waiting Periods After Rehire

The ACA caps any waiting period for coverage at 90 calendar days.⁴ For a rehire, the question is whether the clock restarts.

The regulation allows a fresh waiting period only if treating the employee as newly eligible is “reasonable under the circumstances” and the termination and rehire aren’t a subterfuge to dodge the 90-day cap.⁴ Most employers tie their answer to the break-in-service thresholds already used for measurement. If the break qualifies the employee as new under the 13-week rule or the Rule of Parity, restarting the waiting period is generally defensible. If the break falls short and the employee must be treated as continuing, restarting is much harder to justify. An employee who already completed the waiting period, worked two years, and returned after an eight-week absence should typically be re-enrolled at rehire rather than made to wait another 90 days.

When an Absence Isn’t a Break in Service

Not every period of zero hours is a break. The regulations treat FMLA leave, USERRA military leave, and jury duty as “special unpaid leave,” which is handled differently from a true separation.² For measurement purposes, the employer either credits the employee with hours during the leave or excludes the leave period from the calculation so it doesn’t drag down the average.

An employee deployed for 14 weeks isn’t automatically someone you can treat as a new hire on return. Look first at whether the absence is protected leave rather than a termination. If it’s USERRA-covered military service, the 13-week clock isn’t running against them.

Rechecking Affordability if Pay Changed at Rehire

A rehire often comes back at a different rate. The ACA requires the employee’s share of the premium for self-only coverage not exceed 9.96% of household income in 2026.⁵ Because employers can’t see household income, most rely on the rate-of-pay safe harbor.

Under that safe harbor, affordability is measured against the employee’s pay rate at the start of the coverage period. For hourly employees, the employer must adjust the calculation downward if pay decreases, but is not required to adjust it upward if pay increases.⁶ A rehire returning at a lower hourly rate is a prompt to recheck affordability. Coverage that passed at $22 an hour may fail at $16.

2026 Penalties for Misclassifying a Rehire

The shared-responsibility penalties are indexed annually, and both figures rose meaningfully for 2026.⁷

Section 4980H(a) — the “no offer” penalty. If you fail to offer minimum essential coverage to at least 95% of full-time employees and even one gets a premium tax credit, the penalty is $3,340 per year for each full-time employee, minus the first 30.⁷
Section 4980H(b) — the “unaffordable or no minimum value” penalty. If coverage is offered but fails one of those tests, the penalty is $5,010 per year for each full-time employee who actually receives a Marketplace subsidy.⁷

A single rehire wrongly treated as new — with a resulting gap in the coverage offer — can generate a $5,010 (b) penalty if that person buys subsidized Marketplace coverage. Multiple misclassifications in a high-turnover workforce can push the offer rate below 95% and flip the exposure to the (a) penalty, which applies to the entire full-time roster.¹

Coding Rehires on Form 1095-C

Any employee who was full-time for any month of the calendar year gets a 1095-C, and rehires typically require different codes across the 12 monthly columns.⁸ Line 14 reports what you offered; Line 16 reports why you owe no penalty that month.

For months the employee was fully separated, Line 14 uses Code 1H (no offer) and Line 16 uses Code 2A (not employed during the month).⁸ Do not use 2A for the month of termination itself, since the employee had days of employment that month.

When the employee returns and you’re applying a permissible waiting period or a new initial measurement period, use Code 2D on Line 16. Code 2D flags a limited non-assessment period, telling the IRS you weren’t yet required to offer coverage.⁹ Once the offer takes effect, switch to the appropriate Line 14 offer code and the matching safe-harbor code on Line 16.

Every transition point in that patchwork has to match the break-in-service determination. If you coded a 2D waiting period for someone who was actually a continuing employee, that code will not shield you from an assessment. Errors discovered later are corrected by filing a new 1095-C with the “CORRECTED” box checked and a non-authoritative 1094-C transmittal, and by furnishing the corrected form to the employee.⁸ Fixing the record before the IRS sends a Letter 226-J is far cheaper than contesting a proposed penalty after it lands.

1
Internal Revenue Service. Employer Shared Responsibility Provisions
2
eCFR. 26 CFR 54.4980H-3 – Determining Full-Time Employees
3
Internal Revenue Service. Identifying Full-Time Employees
4
GovInfo. 45 CFR 147.116 – Prohibition on Waiting Periods That Exceed 90 Days
5
Internal Revenue Service. Rev. Proc. 2025-25
6
Internal Revenue Service. Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act
7
Internal Revenue Service. Rev. Proc. 2025-26
8
Internal Revenue Service. Instructions for Forms 1094-C and 1095-C
9
Internal Revenue Service. Instructions for Forms 1094-C and 1095-C (2025)