The Affordable Care Act requires applicable large employers (ALEs) to offer appropriate and affordable health coverage to their full time employees who work 30 or more hours per week (130 hours per month). Employers are also required to measure the hours worked of part time and variable hour employees to determine if they should be offered coverage as all other full time employees. There are two methods available to employers for use in measuring: Monthly Measurement Method, and the Look-Back Measurement Method.

Monthly Measurement Method

The monthly measurement method proves difficult in application since an employee must be offered coverage in any month which they worked over 130 hours, yet the employer might not know this until the end of the month. Many employers are unaware of this fact and apply the method incorrectly, measuring one month and then making the offer in the following month. This is an incorrect application of the rules.

Overall, the monthly measurement method leads to uncertainty and inability to predict employees as full time and can lead to unnecessary penalties. For that reason, most employers choose the Look-Back Measurement Method.

Look-Back Measurement Method

The Look-Back Measurement Method involves designating a period of months over which you measure the hours worked by an employee to determine if they are indeed full time. This period is called the measurement period. Following the measurement period, employers are given a short administrative period during which they can communicate and enroll any new employees on the plan. Finally, employees enter their stability period where they are guaranteed to maintain coverage regardless of the number of hours worked.

Administrating the look back method can be complex. However, by following our simple methodology you can easily track your employees and ensure you offer coverage to anyone who becomes a full time employee.