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Supporting you through the 2020 ACA reporting season

We know that workplace challenges often create the greatest stress on HR teams who are working diligently to keep their workforce healthy and safe. That's why we are committed to sharing what we know around regulatory changes and their bearing on health reform, insurance eligibility, payroll and more during this reporting season. 

To keep you in the know, here's our Ask the Expert question of the week:  

Q: How can I use the look-back method to determine the ACA eligibility for my employees? 

A. Making sure the correct employees are offered affordable benefits is one of the most important steps in complying with the Affordable Care Act (ACA). One way to measure eligibility for health benefits is by using the look-back method.  

What is the look-back method? 
The look-back method is an approach for measuring full-time status by tracking employee hours over a set period of time and then calculating the average number of hours worked over that period to determine full-time status. 

Under the Employer Shared Responsibility Provisions of the ACA, large employers must offer health coverage that meets minimum essential coverage (MEC) requirements to 95 percent of their full-time employees or be exposed to possible penalties. Under the law, a full-time employee averages 30 or more hours of service per week or 130 hours per month. The look-back method is broken into three essential periods that you need to understand to simplify the ACA guidelines.  

Measurement Period
The measurement period is a length of time chosen by the employer between three and 12 months long. There are two types of look-back periods. The initial period is for newly hired employees, and the standard measurement is for ongoing employees.  

Initial measurement period: If a new employee is reasonably expected to work more than 30 hours a week, the employee and his/her dependents must be offered coverage within 90 days. However, if it can't be reasonably determined if the employee will work more than 30 hours a week, you can use a look-back period between three and 12 months starting between the first pay period and the first day of the month following the start date. The initial measurement period and the administrative wait period together cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee's start date. If the employee averages over 130 hours per month during this time, they are considered fulltime and eligible for coverage throughout the subsequent stability period. 

Standard measurement period: For ongoing employees, employees who have worked one full standard measurement period, an employer must look back to see if they averaged 130 hours or more per month. If the employee has, they are eligible for benefits under the ACA. 

Wait Period 
The second period is the wait period, or the administrative period. The administrative period is the combination of time from hire date to start of measurement and from end of measurement to offer of coverage. This period can be no more than 90 days and is used as a time where the employer extends offers of coverage, and the employee makes their benefits selection.  

Stability Period  
The final period is the stability period. The stability period is where full-time employees are locked into their coverage period. This period cannot be shorter than the measurement period and must be between six and 12 months long. Initial stability period must be the same length as standard stability period.

  • For those determined full time, the stability period must be at least six months but no shorter in duration than the standard measurement period.
  • For those determined not to be full time, the stability period must be at least six months, but must not be longer than standard measurement period.
It is important to know that once an employee is considered full-time, they are considered full-time throughout the measurement period, even if their hours are reduced below 130 hours per month, with very few exceptions. It is also important to note that if an employee is furloughed for 13 weeks or more, and works zero hours, then the employer can treat the employee as a new hire when they return to service. The employee will need to maintain healthcare coverage during the stability period if they are measured eligible or the employer could be exposed to risk.

Accurate eligibility measurement has become increasingly important as IRS penalty assessments can amount to millions of dollars. Want to know more? Check out our full Measuring ACA Eligibility Through the Look-Back Method to give you more details on how to determine the right approach for you. Health e(fx) ACA solutions make look-back measurement easy. Read about our solutions here.  

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