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Look Back Period

Look back Period – Measurement Period – Administrative Period – Stability Period

These are the three essential components in determining the size of your company relative to the Affordable Care Act (ACA), as well as the eligibility of employees to participate in your health insurance.

All employers are impacted by ACA, but the new requirements depend on the number of employees or the number of W-2s in any given year.  Under ACA, employers with 50 or more full-time equivalent employees (FTE) are required to offer health benefits to employees averaging at least 30 hours of work per week.  If the employer does not offer health benefits, they are required to pay an annual penalty.  This new requirement is also known as the “pay or play” provision.  It is effective for plan years beginning on or after January 1, 2014 and applies to employers regardless of grandfathered status.

In order to comply with the new “pay or play” provision, employers need to determine the size of their company, whether they have 50+ full-time equivalent employees or not.

Employees who work an average of 30+ hours a week are considered FTE.  To determine if an employee is full-time or not, employers need to use the look-back period method.

Employers must also determine if and when an employee becomes a full-time employee. The following is a summary of look back period.

Look Back period – Method to determine if a company is a large or small employer by using a period in time, determined by the employer, which is no longer than 12 months and no shorter than 3 consecutive months.  The 2014 company status will be determined by your 2013 look back period.

Employee Eligibility Measurement period –Employers can select a 3 to 12 consecutive month period to determine if an employee has full-time status, and therefore is eligible for company benefits.

Administrative period – Employers have up to 90-days to asses each employee, determine if the employee is classified as a full-time employee and to notify the employee of his/her eligibility.

Stability period – Once the employer has determined and notified the employee of their full-time status, employees will be considered full-time for a stability period which can be no less than the measurement period.  At the end of the stability period, the employer may again measure the employee’s status.

Per the Cigna website – this is complex, and the rules differ for new employees and ongoing employees, we suggest that you refer to Treasury Notice 2012-58 and work with your legal counsel to deal with the nuances of your unique employee population.

For more information please visit the Cigna website at: http://www.cigna.com/aboutus/health-care-reform/faqs#minimumEssentialCoverage

What might an example be of how the look back, administrative and stability periods work together?

The following simple example illustrates how the look back period method would apply in a hypothetical situation:

  •  John is an employee and his hours vary.
  • His employer has selected the maximum 12-month initial measurement period to determine whether its employees are “full-time.” [An employer can choose a measurement period of between 3 -12 months.]His employer has selected the maximum 12-month initial measurement period to determine whether its employees are “full-time.” [An employer can choose a measurement period of between 3 -12 months.]
  • John’s employer has also elected the maximum 3 month administrative period.   During this period the employer must gather the hours worked data, crunch the numbers, make the determination as to a full-time status and notify their employees regarding the eligibility for coverage.
  • For purposes of the employer mandate that begins on January 1, 2014, John’s employer would look back at the average monthly hours John worked during the 12-month measurement period of 10/1/11 through 9/30/12, and during the 90-day administrative period of 10/1/12 – 12/31/13, John’s employer determines that he is a full-time employee and communicates to John his eligibility for coverage.
  • Beginning on January 1, 2014, John’s employer must thereafter treat John as a full-time employee for a 12-month stability period that ends on 12/31/14, even if John’s average hours worked during this stability period are fewer than 30 hours per week.  [The stability period can be no less than the measurement period used by the employer to determine the employee’s status for a stability period.]
  • John’s employer will thereafter reassess his status going through the same process for the next stability period that commences on January 1, 2015.
Per Cigna website 4/3/13