An applicable large employer must offer minimum essential coverage providing minimum value to its full-time employees and their dependents. A full-time employee is an employee who works 30 or more hours per week (130 hours per month).
Employers have two options for counting their employees’ hours for determining full-time status and eligibility for health coverage.
Under the Monthly Measurement Method, an employer determines each employee’s status as a full-time employee for a calendar month by counting the employee’s actual hours of service for that month. This method is useful for employees whose hours do not fluctuate throughout the year.
Under the Lookback Measurement Method, an employee counts the employee’s hours of service in one period (the measurement period) to determine the employee’s full-time status for a future period (the stability period). This method is useful for employees who are variable hour and whose hours of service fluctuate throughout the year.
Terms for Lookback Measurement Method:
- Measurement Period- The lookback period over which hours are counted to determine if the employee averaged 30 hours per week (130 per month).
- Standard Measurement Period- Used for ongoing employees.
- Initial Measurement Period- Used for new employees.
- Stability Period- The period that follows and is associated with a measurement period. An employee’s full-time or part-time status is locked in for the stability period, regardless of the hours the employee actually works during the stability period. The stability period begins at the end of the measurement period and any administrative period.
- Administrative Period- The period after the end of a measurement period and before the beginning of the stability period associated with the measurement period during which time the employer can enroll the employee.
- Ongoing Employee- An employee who has been employed for at least one complete standard measurement period.
- New Employee- An employee who has not been employed for at least one complete standard measurement period.
Employers with a variable hour workforce may wish to use the Lookback Measurement Method for determining if an employee should be considered a full- time equivalent employee and offered health coverage. Using this method allows an employer to treat an employee consistently for a set period and not worry about offering and rescinding coverage throughout the plan year.
An hour of service for counting purposes is each hour an employee is paid or entitled to payment for the performance of duties for the employer, and each hour for which an employee is paid, or entitled to payment, from the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.
For hourly employees, hours are counted by records of actual hours worked or hours not-worked for which payment is due (vacation, holiday, sickness, etc.). For non-hourly employees, hours may be calculated using one of the following options:
- Using actual hours worked for which the employee is entitled to payment;
- Using a days-worked equivalent where each day is equal to 8 hours of service; or
- Using a weeks-worked equivalent where each week is equal to 40 hours of service.
