Generally, § 4980H provides that an applicable large employer is liable for an assessable payment if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction and either:

(1) the employer fails to offer to substantially all of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan and any full-time employee is certified to receive a premium tax credit or cost-sharing reduction (§ 4980H(a) liability); or

(2) the employer offers its full-time employees (and their dependents) the opportunity to enroll in MEC under an eligible employer-sponsored plan that, with respect to a full-time employee who has been certified for a premium tax credit or cost-sharing reduction, either is unaffordable within the meaning of § 36(B)(c)(2)(C)(i) or does not provide minimum value within the meaning of § 36(B)(c)(2)(C)(ii) (§ 4980H(b) liability).

The annual assessable payment under § 4980H(a) is based on all (excluding the first 30) full-time employees, while the annual assessable payment under § 4980H(b) is based on the number of full-time employees who purchase coverage on an exchange and receive a premium tax credit in connection with the exchange-based coverage.

Substantially all means that the employer offers coverage to all but 5% or, if greater, five of its full-time employees. The term dependents does not include spouses.

An employee is an individual who is an employee under the common law standard, and an employer is the person that is the employer of an employee under the common law standard. The common law standard is a facts and circumstances analysis but essentially an employment relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. In other words, an employment relationship exists if an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if the employer has the right to do so. The guidance further provides that “leased employees” (under the rules prescribed by Code § 414(n)(2)) would not be “employees” for this purpose, because § 4980H makes no reference to leased employees and accordingly would not apply to § 4980H.

Hours of Service

§ 4980H treats, with respect to a month, an employee who has an average of at least 30 hours of service per week as a full-time employee (130 hours of service in a calendar month treated as the monthly equivalent of at least 30 hours of service per week).

As under existing Labor Regulations, an employee’s hours of service would include the following:

• Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and
• Each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence (29 C.F.R. § 2530.200b-2(a)). There is no limit to the hours that may be credited for paid leave.
• For employees paid on an hourly basis (hourly employees), the employer would be required to calculate actual hours of service from records of hours worked and hours for which payment is made or due (payment is made or due for vacation, holiday, illness, incapacity, etc.).

For employees not paid on an hourly basis (non-hourly employees), the employer would be permitted to calculate the number of hours of service under any of the following three methods:

• Counting actual hours of service from records of hours worked and hours for which payment is made or due for vacation, holiday, illness, incapacity, etc., as described above;
• Using a days-worked equivalency method whereby the employee is credited with eight hours of service for each day for which the employee would be required to be credited with at least one hour of service
• Using a weeks-worked equivalency of 40 hours of service per week for each week for which the employee would be required to be credited with at least one hour of service

Although an employer would be required to use one of these three methods for counting hours of service for all non-hourly employees, an employer need not use the same method for all non-hourly employees, but may apply different methods for different classifications of non-hourly employees, if the classifications are reasonable and consistently applied. In addition, an employer may change the method of calculating non-hourly employees’ hours of service for each calendar year. For example, for all non-hourly employees, an employer may use the actual hours worked method for the calendar year 2014, but may use the days-worked equivalency method for counting hours of service for the calendar year 2015.

The number of hours of service calculated using the days-worked or weeks worked equivalency method would be required to reflect generally the hours actually worked and the hours for which payment is made or due. An employer would not be permitted to use the days-worked or weeks-worked equivalency method if the result would be to substantially understate an employee’s hours of service in a manner that would cause that employee not to be treated as full-time.

In addition to the above, the following rules apply:

• All hours of service an employee performs for members of the controlled group are counted.
• Services performed outside of the United States: hours of service do not include hours of service to the extent the compensation for those hours of service is “foreign source income.” This means that hours of service generally will not include hours of service worked outside of the U.S. Residency or citizenship is not considered for these purposes.
• Commission Employees, Adjunct Faculty, Transportation Employees (e.g., Airline Pilots) and Similar Positions: until further guidance is issued, employers with employees in these types of positions must use a reasonable method of crediting hours of service consistent with the purpose of 4980H. Methods that result in counting only some of an employee’s hours, or that would characterize a “full-time” employee as part-time would not be considered reasonable.

Application

The following was created to illustrate the full-time safe harbor as explained in Notice 2012-58 and the proposed regulations. The safe harbor (the guidance is not mandatory but optional) is for purposes of determining whether someone is a full-time employee for purposes of the employer pay-or-play mandate under the health care reform law. If the employee determines that an employee averaged at least 30 hours per week during the measurement period, then the employer must treat the employee as a full-time employee during the subsequent stability period.

Please note that the examples provided below are used for illustration purposes only; the specific dates used in the examples are only to illustrate application of the safe harbor guidance.

Notice 2012-58 provided that the guidance could be relied on through at least the end of 2014 (for measurement periods that begin in 2013/2014 and the associated stability periods, including stability periods ending after 2014). Employers may rely on the proposed regulations pending the issuance of final regulations or other guidance.

The safe harbor distinguishes between new employees and ongoing employees. For purposes of the guidance, calendar month means one of the full months named in the calendar (e.g., January, February March) and the terms month means the period from a day in one month to the prior day of the following month (e.g., January 15 to February 14).

Ongoing Employee

Definitions

Ongoing employee: An employee who has been employed by the employer for at least one complete standard measurement period. Only an ongoing employee who works full-time during the standard measurement period is offered coverage during the stability period associated with that measurement period.

Standard measurement period: A defined time period of not less than 3 but nor more than 12 consecutive calendar months, as chosen by the employer. The employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided the determination must be made on a uniform and consistent basis for all employees in the same category. Acceptable categories for which employers may use measurement periods and stability periods that differ in either length or in their starting and ending dates are:

• Each group of collectively bargained employees covered by a separate collective bargaining agreement
• Collectively bargained employees and non-collectively bargained employees
• Salaried employees and hourly employees
• Employees located in different states

The proposed regulations employers to adjust the starting and ending dates of their measurement periods. They can correspond with the beginning and ending of regular payroll periods if each of the payroll periods is one week, two weeks or semi-monthly in duration.

An employer may change the standard measurement period or standard stability period from year to year, but cannot change either period once the standard measurement period has begun. Solely for purposes of stability periods beginning in 2014, employers may adopt a transition measurement period that is shorter than 12 months but that is no less than 6 months long and that begins no later than July 1, 2013 and ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014.

Administrative period: A time period of no longer than 90 days following the end of a standard measurement period and ending before the associated stability period. Any administrative period between the standard measurement period and the stability period may neither reduce nor lengthen the measurement period of the stability period. The administrative period will overlap with the prior stability period, so that, during any such administrative period applicable to ongoing employees following a standard measurement period, ongoing employees who are eligible for coverage because of their status as full-time employees based on a prior measurement period would continue to be offered coverage.

The administrative period is similar to an employer’s usual open enrollment period.

Stability period: For those deemed to be full-time employees it is a period of at least 6 consecutive calendar months that is no shorter in duration than the standard measurement period and that begins after the standard measurement period and any applicable administrative period. If the employer determines that the employee did not work full-time during the standard measurement period, the employer would be permitted to treat the employee as not full-time employee during the stability period that follows, but is not longer than, the standard measurement period.

To reduce administrative burden, the employer should consider choosing a stability period that aligns with the schedule on which the employer intends to administer the plan (e.g., election year)should match the employer’s plan year (the period of time for which participant elections are effective).

Nonpayment of Premium: The proposed regulations provide that, if an employee enrolls in coverage but fails to pay the employee’s share of the premium on a timely basis, the employer is not required to provide coverage for the period for which the premium is not timely paid, and that employer is treated as having offered that employee coverage for the remainder of the coverage period (typically the remainder of the plan year) for purposes of section the pay-or-play penalty. The regulations generally adopt the provisions applicable for purposes of payment for COBRA continuation coverage, which generally provides a 30-day grace period for payment and also provides rules with respect to timely payments that are not significantly less than the amount required to be paid and for responding to requests by health care providers for confirmation of coverage during the grace period.

Example in Guidance (12-month standard measurement period)

Standard measurement period: 10/15/13 – 10/14/14

Administrative period: 10/15/2014 – 12/31/14

Stability period: 1/1/14 – 12/31/14; 1/1/15 – 12/31/15

Employee A worked full-time during standard measurement period, 10/15/13-10/14/14, Employee A must be treated as a full-time employee for the entire stability period, 1/1/15 – 12/31/15.

Employee B did not work full-time during standard measurement period, 10/15/13-10/14/14, Employee B is not a full-time employee during the stability period, 1/1/15-12/31/15. If Employee B had coverage under the plan during the preceding stability period, Employee B’s last day of coverage would be 12/31/14 (end of current stability period, 1/1/14 – 12/31/14).

3 month standard measurement period

3 month standard measurement period: August 1 – October 31, November 1 – January 31, February 1 – April 30, May 1 – July 31

Administrative Period: November 1 – December 31, February 1 – March 31, May 1 – June 30, August 1 – September 30

6 month stability period if deemed full-time employees: January 1 – June 30, April 1-September 30, July 1 – December 31, October 1-March 31

3 month stability period if not deemed full-time employees: January 1 – March 31, April 1 – June 30, July 1 – September 30, October 1 – December 31

Employee A worked full-time during the standard measurement period (8/1/13 – 10/31/13), Employee A must be treated as a full-time employee for the entire stability period (1/1/14 – 6/30/14).

Employee B did not work full-time during standard measurement period (8/1/13 – 10/31/13), Employee B is not a full-time employee for following stability period (1/1/14 – 3/31/14). If B had coverage under the plan during the preceding stability period, last day of coverage would be 12/31/13 (end of prior stability period, 7/1/13 – 12/31/13).

Compliance Check

• Are measurement and stability periods longer than 12 months?
• Is the stability period for ongoing employees who work full-time during the standard measurement period shorter than the standard measurement period?
• Is the stability period for ongoing employees who do not work full-time during the standard measurement period longer than the standard measurement period?
• Is the administrative period longer than 90 days?

6 month standard measurement period

6 month standard measurement period: August 1 – January 31, February 1 – July 31

Administrative period: February 1 – March 31, August 1 – September 30

6 month stability period: April 1 – September 30, October 1 – March 31

Employee A worked full-time during the standard measurement period (8/1/13 – 1/31/14), Employee A must be offered coverage for the entire stability period (4/1/14 – 9/30/14).

Employee B did not work full-time during standard measurement period (8/1/13 – 1/31/14), Employee B is not required to be offered coverage for following stability period (4/1/14 – 9/30/14 ). If Employee B had coverage under the plan during the preceding stability period, last day of coverage would be 3/31/14 (end of prior stability period (10/1/13 – 3/31/14)).

Compliance Check

• Are measurement and stability periods longer than 12 months?
• Is the stability period for ongoing employees who work full-time during the standard measurement period shorter than the standard measurement period?
• Is the stability period for ongoing employees who do not work full-time during the standard measurement period longer than the standard measurement period?
• Is the administrative period longer than 90 days?

New Variable Hour/Seasonal Employees

If an employee is reasonably expected at his or her start date to work full-time, an employer that sponsors a group health plan that offers coverage to the employee at or before the conclusion of the employee’s initial three calendar months of employment will not be subject to the employer responsibility payment under § 4980H by reason of its failure to offer coverage to the employee for up to the initial three calendar months of employment.

New Employee Example

ABC Company’s eligibility for its group health plan is first of the month following 60 days. Employee A starts work on June 17, 2013 and he is expected to work full-time. He is not a variable hour or seasonal employee. Employee A will be eligible for coverage on September 1, 2013.

If an employer maintains a group health plan that would offer coverage to the employee only if the employee were determined to be a full-time employee, the employer may use both a measurement period of between three and 12 months (the same as allowed for ongoing employees) and an administrative period of up to 90 days for variable hour and seasonal employees. However, the measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month).

Definitions:

Variable Hour Employee: If, based on the facts and circumstances at the employee’s start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week during the initial measurement period.

Seasonal Employee: Through at least 2014, employers are permitted to use a reasonable, good faith interpretation of the term seasonal employee for purposes of the full-time employee determination.

Guidance:

The employer may use both an initial measurement period of between 3 and 12 months (as determined by the employer) and an administrative period of up to 90 days. The employer measures the hours of service completed by the new employee during the initial measurement period and determines whether the employee completed an average of 30 hours of service per week or more during the period. The following are the parameters of the safe harbor guidance for new variable hour/seasonal employees:

• The initial measurement period must be between 3 and 12 months (as selected by the employer).
• An administrative period of up to 90 days is permissible.
• The initial measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the 1-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month)
• The stability period for such employees must be the same length as the stability period for ongoing employees.
• If an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least 6 consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period).

If a new variable hour/seasonal employee is determined not to be a full-time employee during the initial measurement period, the employer is permitted to treat the employee as not a full-time employee during the stability period that follows the initial measurement period. This stability period for such employees must not be more than 1 month longer than the initial measurement period and must not exceed the remainder of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends. In this situation, allowing the stability period to exceed the initial measurement period by one month is intended to give additional flexibility to employers that wish to use a 12-month stability period for new variable hour /seasonal employees and an administrative period that exceeds one month. To that end, employers could use an 11-month initial measurement period (in lieu of the 12-month initial measurement period that would otherwise be required) and still comply with the general rule that the initial measurement period and administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.

If a new variable hour or seasonal employee experiences a change in employment status (i.e., a material change in the position of employment or other employment status) during the initial measurement period that, had the employee begun employment in such new status, would have resulted in the employee being reasonably expected to be employed on average at least 30 hours a week, the employee generally will be treated as a full-time employee on the first day of the fourth month following the change in employment status (or, if earlier and the employee averaged more than 30 hours of service during the initial measurement period, the first day of the first month following the end of the initial measurement period and any administrative period). Notably, this rule applies only to new employees, not ongoing employees.

The proposed regulations contain rules regarding how the safe harbor requirements apply to employees who are rehired after termination of employment or who resume service after other absences, and, specifically, whether the employer is required to consider the employee’s previous service in determining full-time status, as follows:

Treat as New Employee: If the period of “no service” was at least 26 consecutive weeks, an employer may treat an employee who returns to work as a new employee for purposes of determining the employee’s status as a full-time employee. For “no service” periods of less than 26 weeks, the employer may apply an optional rule of parity and treat the employee as a new employee if the “no service” period is at least 4 but less than 26 weeks long, and is longer than the period of employment. For example, if the employee works 3 weeks, terminates for 10 weeks, and is rehired, the employee may be treated as new.

Treat as Continuing Employee: If neither of these tests is satisfied, the employer must treat the employee who returns to work as a continuing employee who retains the same measurement and stability period that would have applied if the employee had not had a period of “no service” (e.g., if an employee who was being treated as full-time for a stability period returns during that stability period, he or she must be treated as full-time for the balance of the stability period).

Special Rule for Continuing Employee of Educational Organization

Additional requirements apply to continuing employees of educational organizations for educational breaks. Specifically, for periods of at least 4 consecutive weeks (that are not unpaid special leave) the educational organization must either (1) determine average weekly hours excluding the break, or (2) credit employees with average hours for the break that equal the average during the weeks without the break. Crediting for any employment break period is capped at 501 hours a calendar year (not including special unpaid leave).

Special Unpaid Leave

The proposed regulations propose a method for averaging hours when applying the look-back measurement method to measurement periods that include special unpaid leave. This method applies only to an employee treated as a continuing employee upon the resumption of services, and not to an employee treated as terminated and rehired. For this purpose, special unpaid leave refers to a period of unpaid leave subject to the Family and Medical Leave Act of 1993 (FMLA), unpaid leave subject to the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), and unpaid leave on account of jury duty.

Under this proposed averaging method, the employer determines the average hours of service per week for the employee during the measurement period excluding special unpaid leave period and uses that average as the average for the entire measurement period. Alternatively, the employer may choose to treat employees as credited with hours of service for special unpaid leave at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not special unpaid leave.

Transition: Once an employee, who has been employed for an initial measurement period, has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period (at the same time and under the same conditions as other ongoing employees).

Transition Example in Guidance

(Six-Month Standard Measurement Period and Stability Period)

In this example, the employer uses a six-month standard measurement period, starting each May 15 and November 15, with six-month stability periods associated with those standard measurement periods starting January 1 and July 1.

May 10, 2014 hire date. Initial measurement period runs from May 10, 2014 through November 9, 2014 (6 month initial measurement period). Employee works an average of 30 hours per week. Initial stability period runs from January 1, 2015 through June 30, 2015. The employer must test the employee again based on the employee’s hours during the employer’s first standard measurement period that begins after the employee’s start date, which is from November 15, 2014 through May 14, 2015.

The employer tests the employee again based on the employee’s hours during the period from November 15, 2014 through May 14, 2015 (the employer’s first standard measurement period that begins after the employee’s start date), during which the employee works an average of 28 hours per week. The employer continues to offer coverage to the employee through June 30, 2015 (the end of the initial stability period based on the initial measurement period during which the employee worked an average of 30 hours per week), but does not offer coverage to the employee for the subsequent stability period, from July 1, 2015 through December 31, 2015.

3 Month Initial Measurement Period Followed by Administrative Period

The employer, ABC Company, has chosen to use a 3-month measurement period for ongoing employees (see dates below) and a 3/6 month stability period (see dates below). For new variable hour employees, the employer uses a 3-month initial measurement period that begins on the employee’s start date and applies an administrative period that runs from the end of the initial measurement period through the end of the first full calendar month beginning after the end of the initial measurement period.

3 month standard measurement period: August 1 – October 31, November 1 – January 31, February 1 – April 30, May 1 – July 31

Administrative Period: November 1 – December 31, February 1 – March 31, May 1 – June 30, August 1 – September 30

6 month stability period (deemed full-time employee): January 1 – June 30, April 1-September 30, July 1 – December 31, October 1-March 31

3 month stability period (for employees not deemed full-time employees): January 1 – March 31, April 1 – June 30, July 1 – September 30, October 1 – December 31

3 month initial measurement period: May 10, 2014 – August 9, 2014

Administrative period: August 10, 2014 – September 30, 2014

6 month initial stability period (for new employees deemed to be full-time): October 1, 2014 – March 31, 2015

3 month initial stability period (for new employees not deemed full-time): October 1, 2014 – December 31, 2014

Employee A starts on May 10, 2014. The 3 month initial measurement period runs from May 10, 2014 through August 9, 2014. ABC Company uses an administrative period that runs from the end of the initial measurement period through the end of the first full calendar month beginning after the end of the initial measurement period: August 10, 2014 – September 30, 2014. If Employee A is deemed to be a full-time employee, ABC Company must offer Employee A coverage for the stability period that runs from October 1, 2014 – March 31, 2015. If Employee A is not deemed to be a full-time employee, ABC Company does not offer Employee A coverage for the subsequent stability period which runs from October 1, 2014 – December 31, 2014.

For purposes of transitioning from a new variable hour employee to an ongoing employee, ABC Company must test Employee A again based on Employee A’s hours during the first standard measurement period that begins after Employee A’s start date: August 1, 2014 – October 31, 2014 (plus associated administrative period through December 31, 2014). If Employee A is deemed to be a full-time employee during the standard measurement period, Employee A should be offered coverage for the subsequent stability period: January 1, 2015 – June 30, 2015.

Compliance Check

• Does the initial measurement period exceed 12 months?
• Does the administrative period total more than 90 days?
• Does the combined initial measurement period and administrative period last longer than the final day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date?

6 Month Initial Measurement Period Followed by Administrative Period: Date of Hire

The employer, DEF Company, has chosen to use a 6-month measurement period for ongoing employees (see dates below) and a 6 month stability period (see dates below). For new variable hour employees, the employer uses a 6-month initial measurement period that begins on the employee’s start date and applies a 2-month administrative period.

6 month standard measurement period: August 1 – January 31, February 1 – July 31

Administrative Period: February 1 – March 31, August 1 – September 30

6 month stability period: April 1 – September 30, October 1 – March 31

6 month initial measurement period: Starting on date of hire (May 10, 2014): May 10, 2014 through November 9, 2014

Administrative period: 2-month, November 10, 2014 – January 31, 2015

6 month initial stability period: February 1, 2015 – July 31, 2015

Employee A starts on May 10, 2014. The 6 month initial measurement period runs from May 10, 2014 through November 9, 2014. DEF Company uses a 2-month administrative period: November 10, 2014 – January 31, 2015. If Employee A is deemed to be a full-time employee, DEF Company must offer Employee A coverage for the stability period that runs from February 1, 2015 – July 31, 2015. If Employee A is not deemed to be a full-time employee, DEF Company does not offer Employee A coverage for the subsequent stability period (February 1, 2015 – July 31, 2015).

For purposes of transitioning from a new variable hour employee to an ongoing employee, DEF Company must test Employee A again based on Employee A’s hours during the first standard measurement period that begins after Employee A’s start date: August 1 , 2014 – January 31, 2015 (plus associated administrative period through March 31). If Employee A is deemed to be a full-time employee during the standard measurement period, Employee A would be offered coverage for the subsequent stability period, April 1, 2015 – September 30, 2015.

Compliance Check

• Does the initial measurement period exceed 12 months?
• Does the administrative period total more than 90 days?
• Does the combined initial measurement period and administrative period last longer than the final day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date?

6 Month Initial Measurement Period Followed by Administrative Period: First of the Month Following Date of Hire

The employer, ABC Company, has chosen to use a 6-month measurement period for ongoing employees (see dates below) and a 6 month stability period (see dates below). For new variable hour employees, the employer uses a 6-month initial measurement period that begins on the first of the month following the employee’s start date and applies a 2-month administrative period.

6 month standard measurement period: August 1 – January 31, February 1 – July 31

Administrative Period: February 1 – March 31, August 1 – September 30

6 month stability period: April 1 – September 30, October 1 – March 31

6 month initial measurement period: Starting on the first of the month following date of hire (May 10, 2014): June 1, 2014 through November 30, 2014

Administrative period: 2-month, December 1, 2014 – January 31, 2015

6 month initial stability period: February 1, 2015 – July 31, 2015

Employee A starts on May 10, 2014. The 6 month initial measurement period runs from June 1, 2014 through November 30, 2014. ABC Company uses a 2-month administrative period: December 1, 2014 – January 31, 2015. If Employee A is deemed to be a full-time employee, ABC Company must offer Employee A coverage for the stability period that runs from February 1, 2015 – July 31, 2015. If Employee A is not deemed to be a full-time employee, ABC Company does not offer Employee A coverage for the subsequent stability period (February 1, 2015 – July 31, 2015).

For purposes of transitioning from a new variable hour employee to an ongoing employee, ABC Company must test Employee A again based on Employee A’s hours during the first standard measurement period that begins after Employee A’s start date: August 1 , 2014 – January 31, 2015 (plus associated administrative period through March 31). If Employee A is deemed to be a full-time employee during the standard measurement period, Employee A would be offered coverage for the subsequent stability period, April 1, 2015 – September 30, 2015.

Compliance Check

• Does the initial measurement period exceed 12 months?
• Does the administrative period total more than 90 days?
• Does the combined initial measurement period and administrative period last longer than the final day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date?

12-Month Initial Measurement Period Followed by Administrative Period: First of the Month Following Date of Hire

The employer, DEF Company, has chosen to use a 12-month measurement period for ongoing employees (see dates below) and a 12-month stability period (see dates below). For new variable hour employees, the employer uses a 12-month initial measurement period that begins on the first of the month following the employee’s start date and applies a 1-month administrative period.

12 month standard measurement period: November 1 – October 31

Administrative Period: November 1 – December 31

12 month stability period: January 1 – December 31

12 month initial measurement period: Starting on first of the month following date of hire (May 10, 2014): June 1, 2014 through May 31, 2015

Administrative period: 1-month, June 1, 2015 – June 30, 2015

12 month initial stability period: July 1, 2015 – June 30, 2016

Employee A starts on May 10, 2014. The 12 month initial measurement period runs from June 1, 2014 through May 31, 2015. DEF Company uses a 1-month administrative period: June 1, 2015 – June 30, 2015. If Employee A is deemed to be a full-time employee during the initial measurement period (June 1, 2014 – May 31, 2015), DEF Company must offer Employee A coverage for the initial stability period that runs from July 1, 2015 – June 30, 2016. If Employee A is not deemed to be a full-time employee, DEF Company does not offer Employee A coverage for the subsequent stability period (July 1, 2015 – June 30, 2016).

For purposes of transitioning from a new variable hour employee to an ongoing employee, DEF Company must test Employee A again based on Employee A’s hours during the first standard measurement period that begins after Employee A’s start date: November 1 , 2014 – October 31, 2015 (plus associated administrative period through December 31, 2015). If Employee A is deemed to be a full-time employee during the standard measurement period, Employee A would be offered coverage for the subsequent stability period, January 1, 2016 – December 31, 2016.

Compliance Check

• Does the initial measurement period exceed 12 months?
• Does the administrative period total more than 90 days?
• Does the combined initial measurement period and administrative period last longer than the final day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date?

Disclaimer: The information provided on this webpage is for informational purposes only. It is not and is not intended to be tax or legal advice. Consult with your own tax advisor and/or attorney.