Employers with 50 or more full-time employees (including full-time equivalent employees) must offer the opportunity to enroll in health coverage to at least 95% of their full-time employees and their dependents who average at least 30 hours of work per week using a look-back period which is a designated period of not less than six months (and not less than the corresponding measurement period). Failure to comply may result in an Employer Shared Responsibility payment (penalty)—per employee, per month. This is known as the “Pay or Play” provision due to the employer mandate as set by the Patient Protection and Affordable Care Act’s (PPACA).
Who needs to file?
Self-insured group health plans, health insurance issuers, Multi-employer plans , and Government employers are all responsible for reporting the type and period of coverage to the IRS, as well as furnishing a statement to the covered individuals. The reporting will also be used for determining whether the coverage offered meets affordability and minimum value criteria for determining employer penalties.
How do I use the look-back period to determine the number of my employees?
To determine the full time status of the employee based on hours worked, the look-back period method may be used. First, determine whether your employee is ongoing or a new hire.
- For an ongoing employee, you may choose a timeframe between three and 12 months for your look-back period. The length is up to you, but most employers choose twelve months
- For a new hire, you may use the look-back period method between three and 12 months that begins on any date between the start date and the first day of the first month following the start date.
(Note: all time periods chosen must be consecutive.)
How is the look-back period structured?
The look-back period is comprised of three stages:
- The Measurement Period
- The Administrative Period
- The Stability Period
The measurement period portion of the look-back period is at least 3 months, but more often a year, during which you monitor an employee to assess whether he or she has worked 30 hours or more a week on average—which is considered to be full-time.
The administrative period is used to determine if an employee is an FTE and to notify them of their status and eligibility. It may not be longer than 90 days and can’t shorten the stability period.
The stability period is an amount of time at least as long as the measurement period during which an employee’s status is fixed, based on your calculations. In other words, if you determined someone was full-time during the measurement period, they’re considered full-time during the stability period, even if their hours change.
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The information provided does not, and is not intended to, constitute legal or tax advice and is not intended to address the situation of any plan, group or individual; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information.
