Feb 16, 2023
Use of the Look-Back Measurement Method
For purposes of reporting full-time employee counts on the Form 1094-C, as well as reporting full-time versus part-time status by month on Form 1095-Cs, applicable large employers (50 or more FTEs) are permitted to choose between two different methods of measuring full-time status: (i) the monthly measurement method; and (ii) the look-back measurement method.
- Under the monthly measurement method, employees with 130 or more hours of service in a month are full-time.
- Under the look-back measurement method, employees who averaged full-time hours during the previous measurement period are generally full-time for the entire corresponding stability period, even if there is a reduction in hours or leave of absence.
For employers with mostly regular full-time and part-time employees, the monthly measurement method is simplest and therefore generally the best choice. But for employers with a significant number of variable hour or seasonal employees, it may be worth using the more complicated look-back measurement method because it may allow the employer to treat fewer employees as full-time, and it also makes tracking eligibility for variable hour employees easier (e.g., annually rather than monthly).
If an applicable large employer wishes to use the look-back measurement method, it cannot be used only for part-time, variable hour, or seasonal employees. It must be used for all employees, or at least all hourly employees. An employer is permitted to use different measurement methods and periods in general, but only for the following categories of employees:
- Collectively bargained employees and non-collectively bargained employees;
- Salaried employees and hourly employees; and
- Employees whose primary places of employment are in different states.
While the look-back measurement method cannot be used solely for variable hour or seasonal employees, using the look-back measurement method won’t really impact full-time employees if they continue to average full-time hours each measurement period. However, if a full-time employee moves to a part-time or variable hour position, it may be necessary to continue offering coverage through the end of the current stability period and consider their average hours during the most recent measurement period matter for purposes of subsequent offers of coverage.
Employers may choose to apply measurement and stability periods from 3-12 months in length. Most employers choose to use a 12-month cycle to align with the group health plan. The 12-month cycle can be summarized as follows:
- Ongoing employees are measured during a 12-month standard measurement period prior to the group health plan’s open enrollment. Those employees who earn 1,560 or more hours of service during the standard measurement period (or average 30 or more hours of service per week) are offered coverage for the following plan year, even if there is a reduction in hours.
- New hire full-time employees who are expected to average 30 hours of service or more per week are offered coverage according to the waiting period rules and measured monthly until they can be transitioned into the standard measurement period with the rest of the ongoing employees to determine ongoing eligibility.
- New hire variable hour, seasonal and part-time employees are subjected to a 12-month initial measurement period beginning 1st of the month following date of hire. Those employees who earn 1,560 or more hours of service during the initial measurement period (or average 30 or more hours of service per week) are offered coverage for a 12-month stability period, even if there is a reduction in hours. Following the initial measurement and stability periods, the employees are measured along with the rest of the ongoing employees during the standard measurement period to determine ongoing eligibility.
For longer-term employees, the process is fairly straightforward because they are all measured over the same time frame each year and then offered coverage (or not) for the plan year. But for new hires, the look-back measurement method is a little trickier because each new employee is on their own cycle until they have been employed long enough to transition into the standard cycle. If the employer thinks of it as a 12-month waiting period, that sometimes makes it easier.
While certainly possible to handle administration of the look-back measurement method internally, many employers use a system offered by their payroll vendor or benefit administration platform to help track eligibility. By setting up the system with the appropriate time frames and entering in the hours of service by month for all employees, the system can then help track full-time status in accordance with the rules for the look-back measurement method.
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