The ACA’s measurement, administrative and stability periods
March 3, 2015
As we get rolling through the first quarter of 2015, we hope our members that are considered Applicable Large Employers under the Affordable Care Act are taking the time and steps necessary to monitor their workforce and measure the hours worked for any variable hour or seasonal employees. Below are the definitions and a couple examples we hope help you get your mind wrapped around these new requirements. Remember that in early 2016 you are going to have to report these to the IRS for the first time (see accompanying article).
1. New hire (variable hour, seasonal and part-time employees) – Initial Measurement Period starts on either the day of hire or the first of the month coinciding, with or following, the date of hire and can last 3 – 12 months. The stability period associated with the initial measurement period must be the same length as the stability period for full-time employees.
2. New hire (full-time) – if the employee is reasonably expected at the time of hire to be working a full-time schedule (averaging at least 30 hours of service per week), then the employee must be offered coverage by the first day of the fourth full calendar month following date of hire. Whether the employee continues to be counted as a full-time employee will be determined on a month-to-month basis until the employee has completed the first standard look back measurement period. Effectively, there is no stability period until the employee completes a Standard Measurement Period.
3. Ongoing Employee – Standard Look back Measurement Period picked by employer 3 – 12 months (must be a consistent 3 – 12 months). An employer can use a shorter than normal standard measurement period of at least 6 consecutive months in Transition Year—but this shorter measurement period must have started no later than July 1, 2014.
4. Administrative Period – Time allowed to figure out full-time or not full time based on Measurement Period cannot be more than 90 days long.
5. Stability Period – Time coverage is offered to full-time employees—new variable hour, seasonal and part-time employees. For new employees who measure as full-time during an Initial Measurement Period, the stability period must be a minimum of 6 months long and least as long as the initial measurement period (e.g., 3-month initial measurement period = stability period of at least 6 months; 11-month initial measurement period = stability period of at least 11 months). For new employees who measure less than 30 hours, the stability period must not be more than one month longer than the initial measurement period (e.g., 3-month initial measurement period = stability period of no more than 4 months; 11-month initial measurement period = stability period of no more than 12-months).
Company uses a Standard Measurement Period of January 1 – June 31 and a 2 month Administrative Period. (A six-month measurement period means that the employer must run two measurement periods every year. Thus, this employer would have Measurement Periods beginning on January 1 and July 1, and Stability Periods that begin on March 1 and September 1.)
New hire October 1, 2014 with a 6 month initial measurement period and 2 month Administrative Period would be eligible for coverage beginning June 1, 2015.
Coverage would be offered for a minimum of 6 months, but could be seven months. Say June 1, 2015 through November 30, 2015.
In his first year of employment, this employee would go through the Initial Measurement Period and the Standard Measurement Period, Initial starting in October 2014 and Standard starting in January 2015.
Here are a couple of examples that will help you better understand:
Assume this employee is full-time based on the hours worked in the Initial Measurement Period – he would then be covered through November 30, but based on his hours in the Standard Measurement Period he did not qualify due to a reduction in hours. Would he then lose coverage at the end of his first Stability Period – November 30 – and not be eligible again until the next Stability Period (assuming he qualifies) which starts the following September 1? Answer: If he did not average 30 hours from January 1 – June 31 2015, then his coverage ends on November 30, 2015 and he is considered part-time until the end of the stability period that ends on February 29, 2016. When he loses coverage on November 30, 2014, he is in the measurement period that began on July 1 and ends on December 31, 2015. If he measures full-time during that measurement period, he will be eligible again for coverage during the stability period that begins on March 1, 2016.
Same guy – following year. Company uses the Ongoing Measurement Period of 6 months with a 2 month Administrative Period. Assume Ongoing Measurement Period timing is January 1 – June 31, 2014 and Administrative Period is July 1 – August 31, 2014 (There must also be another Standard Measurement Period that runs July 1 – December 31, 2014 with an Administrative Period that runs January 1 – February 28, 2015). Coverage would begin on September 1, 2014 and run through the 6 month Stability Period ending February 28, 2015. If the employee was determined to not be full-time, he would lose coverage (or not be eligible again) until at least September, 2015 when the next Stability Period begins? Answer: if employee measured part-time during January 1 – June 30 measurement period, no coverage must be offered from September , 2014 – February 28, 2015. Whether the employee must be offered coverage from March 1, 2015 – August 31 2015 will depend on how the worker measured during the measurement period that ran from July 1 2014 – December 31, 2014.