Guidance Issued on Changes in Measurement Periods

Posted by BAS - 23 October, 2014


Health care reform requires applicable large employers to offer minimum essential coverage to their full time employees or pay a penalty.  Employers with 100 or more employees will be subject to the penalty beginning in 2015, and the penalty may be applied to employers with 50 or more employees beginning in 2016. 

The IRS provides different methods for determining an employee’s full-time status.  Hours may be counted on an as-worked, monthly measurement basis, or employers may look back at an employee’s past hours to determine if the employee should be treated as a full-time employee going forward.  This second method is called the “look back period.”  Employers establish the measurement period they will look back to, and then there is a stability period during which the full-time or not full-time status is locked-in going forward.  Employers can choose different measurement methods and measurement periods for different classes of employees. 

The IRS released new guidance on how the look back period can be administered if an employee changes from one employer in a controlled group to another employer in a controlled group with different measurement periods, or if the employee switches from an employment class using the monthly measurement period to one using the look back measurement period.  The guidance is in proposed form, but may be relied on immediately.  It gives examples of how hours can be counted for full-time status when there is a change in an employee’s duration or start date of a measurement period under the look back method.  It also addresses what steps to take when an employer elects to change between the look back and the monthly measurement methods. 

BAS can assist with health care reform data collection and reporting.  For more information on our health care reform resources, click HERE.

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