Employer Mandate: Measurement and Look-back Periods

 In Healthcare Reform FAQ

Beginning in 2015, PPACA’s employer mandate generally requires applicable large employers to offer

coverage to all full-time employees (FTEs), defined as those working at least 30 weekly or 130 monthly

hours, and their dependents, or risk a penalty. Employers face special challenges in identifying which

of their employees are FTEs, particularly for those with irregular or seasonal work schedules, such as

landscaping and construction companies, hotels, restaurants, retail and similar businesses. Employers

with these types of employees may choose to implement “measurement periods” (also commonly

referred to as “look-back periods”) to determine whether the employee actually works enough hours to

be considered an FTE for purposes of the employer mandate.

“Variable Hour” and “Seasonal” Defined

   Before discussing the details relating to measurement periods, it is important to understand the

   definition of “variable hour” and “seasonal” employees.
 

A “variable hour” employee is one whose schedule cannot be definitively known in advance. In other

words, the employee’s hours vary such that it is not possible to determine in advance whether the

employee will work 30 weekly (or 130 monthly) hours or more during their period of employment.

Factors that may apply in identifying variable hour employees include whether:

1. The employee is replacing a full- or part-time employee

2. Employees in the same or similar positions are full- or part-time employees

3. The job was advertised or otherwise represented as requiring 30 hours or more per week

A “seasonal” employee is one whose customary annual employment does not exceed six months and

whose work begins at approximately the same time each year. Examples of a seasonal employee may

include a holiday seasonal retail store employee, a ski instructor or a golf course maintenance worker.

In special circumstances, an employee may still be considered seasonal where the season extends

beyond six months, such as when a ski instructor works seven or eight months due to an unusually

long winter.

Importantly, the following would not likely be considered variable hour or seasonal employees: a nonseasonal,

short-term, full-time employee; an intern or per diem employee working full-time hours; or

an employee hired into a high-turnover position but working full-time hours.

Measurement and Stability Periods Generally

For variable hour and seasonal employees, employers have the option to use measurement periods to

determine if the employee is an FTE to whom they must offer coverage. In the alternative, employers

can track hours and determine FTE status on a monthly basis. Generally, a measurement period

is a period of between three and 12 months (the employer can choose) during which the employer

measures the average weekly or monthly work hours of the employee. If, during that measurement

period, an employee works 30 hours or more per week (or 130 hours per month) on average, then

that employee becomes eligible for coverage (i.e., is treated as an FTE) during a subsequent coverage

period, called a “stability” period. Employers may also implement an “administrative” period between

the measurement and stability periods, in which the employer calculates the measurement period

hours, notifies eligible employees of FTE status and provides an enrollment opportunity for them to

elect coverage.

 

Employers may use a different measurement period for employees in the same category, of which there are four: collectively bargained and non-collectively bargained employees, employees covered by different collective-bargaining agreements, salaried or hourly employees, and primary places of employment in different states.

Details on the measurement periods vary for ongoing employees (standard periods) versus newly hired employees (initial periods). The differences between standard and initial periods are described in more detail below.

 

Ongoing Employees

General Parameters for Standard Periods (Ongoing Employees)

Measurement Period 3-12 consecutive months Stability Period The longer of 6 months or the standard measurement period length Administrative Period Up to 90 days Below are two examples of how the ongoing employee standard measurement periods might work with a six-month measurement period (counting hours monthly) and a 12-month measurement period with an administrative period and a calendar-year plan.

 

For more information please call David at 713.626.2838

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