The ACA and Your Business: How the Measurement Period Works
We already introduced you to the Measurement Period briefly. Today, we want to refresh your measurement memory and give you some more details on how it works, exactly.
The measurement period will be used to determine the number of actual FTEs (Full Time Employee Equivalents) of each employer. Measurement periods can range from 3-12 months during which each employee’s hours will be evaluated to see whether they should be considered a full or part time employee. This is only applicable to existing employees or new hires who have variable hours. Full time employees do not need to be measured. We know they are full time, we know they must be offered benefits – no question, no problem. For example if you have 70 employees and they are all full time, the Measurement Period is unnecessary. All of your employees are eligible for health benefits. Case closed.
But, don’t forget that the ACA filing rules only apply to businesses with 50+ full time employees. If you have 12 employees, you are not required to have another thought about the ACA at the moment. So you can go back to business as usual.
Employers that will make the most use of the Measurement Period are those that have a combination of full and part time employees that MAY put them over the 50 employee threshold. As we mentioned in the introductory article, the Measurement Period is first used to determine whether your business is even an ALE that must comply with the ACA. The Measurement Period will combine all part time employee hours to determine whether you are, in fact, an ALE and therefore must file ACA forms must file ACA forms must file ACA forms 6.
Here is how it works: If an employer has 28 full time employees, and 40 part time employees who each work 20 hours a week, those 800 part time hours are combined and divided by 30 to arrive at the number of FTEs (Full Time Employee Equivalents). So, essentially this business has 28 full time employees, and an additional 27 FTEs. Therefore, according to the ACA they have a total of 55 employees, are an ALE, and must comply (with transition relief for 2015). One reason this is done is to discourage companies from cutting a full time employee and replacing him/her with 2 part timers to avoid providing insurance.
So, the Measurement Period is followed by an Admin Period, which allows businesses time to prepare paperwork and enroll employees for coverage. This lasts for a maximum of 90 days. Then the Stability Period kicks in afterwards, during which the employee’s benefit eligibility status won’t change, even if his/her hours change.
Here is an example of a calendar using a 12 month measurement period for plan year 2016:
There might still be questions as you begin to implement your Measurement Period because some businesses may have very specific and unique situations. Just remember that the basic guideline for the ACA is that your employees are considered full time if they work 30+ hours in a week or average 130+ hours per month.
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