The Ins and Outs of Measurement Periods for ACA Tracking
According to the Affordable Care Act (ACA), employers with 50 or more full-time employees – employees averaging at least 30 hours of work per week – must offer health benefits to “substantially all” of those full-time employees and their dependents. Failure to comply may result in an Employer Shared Responsibility payment, and that fine is calculated per employee, per month of non-compliance.
The key to determining who is a full-time employee is based on measurement periods – a set period of time where you track and measure the hours worked by the employee and establish an average of hours worked. Many organizations have been tempted to simply review a single month, see that the employee worked 30 hours or more for that month, and offer benefits. The drawback to this seemingly simplistic solution is this: if the employee does not reach full time hours in the following months, you’re faced with taking them back out of that eligibility status. This could result in a maddening cycle of employees coming in and then going out of eligible status.
There's a better way to do it: measurement periods
By setting a measurement period of 6 or 12 months, you can review hours worked by employees over time and establish who should be offered coverage based on full-time status. Tango recommends treating the first 12 months (starting on the first of the month following an employee’s hire date or starting on the hire date if the hire date is the first of the month) as an Initial Measurement Period to measure newly hired employees for eligibility. If an employee measures 30 hours per week or more across the entire period, they should be offered coverage during a Stability Period. The Initial Measurement Period can also be referred to as a New Hire Measurement Period.
The Stability Period is the timeframe during which the coverage offered to an eligible employee must remain effective (if the employee enrolls). The Stability Period must be at least the same length of time as the Measurement Period. Tango typically uses a 12-month measurement period, so the Stability Period is also 12 months.
Choosing a 12-month timeframe
While the IRS allows for Measurement Periods at the three, six and 12-month timeframes, Tango recommends the use of the 12-month period. Using the 6-month Measurement Period requires the employer to make offers of benefits to eligible employees twice a year, resulting in two Administrative Periods and double the complexity. And if the 6-month period results in that level of upheaval, just imagine the stress a 3-month period would cause on an already over-burdened HR team.
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Categorized in: ACA