Date: Jun 01, 2014
June 2014 - Jay Leno to Headline WG Annual Meeting

Dear Jon,


I’m confused about how to comply with the large employer mandate in 2015.  We are a large employer and have more than 300 employees.  I know we are required to offer coverage to full-time employees, but how do I identify these people.  Help!

Panicked in Prunedale


Dear Panicked,


As an employer with 300 employees your concern is definitely warranted.  The Patient Protection and Affordable Care Act’s (“PPACA”) large employer mandate is effective next year (2015) for employers with 100 or more full-time employees.  In 2016, the mandate is effective for all large employers with 50 or more full-time employees.  Here’s a good start to understanding what you need to know for January 1, 2015.

Beginning in 2015, PPACA penalties may affect large employers that fail to offer qualifying coverage to their full-time employees and their dependents.  Employees are considered full-time if they work 30 hours per week (based on a 52-week year) or 130 hours per month (based on a 12-month calendar year).  Confused by how 30 hours per week equals 130 hours per month?  Let me clarify: 30 hours/week X 52 weeks = 1560 hours and 130 hours/month X 12 months = 1560.  Whether an employee is full-time or not is determined by using one of two different methods.  The first method is called the Monthly Measurement Method (Monthly Method).  It is the default method under PPACA and will apply unless you affirmatively elect the second method.  The second method is the Look-Back Safe Harbor Method (Look-Back Method).  The Look-Back Method is optional and only applies if you elect it and put it in play.

The Monthly Method is pretty straightforward.  An employer may impose an optional bona fide “orientation period” of up to one month followed by a waiting period of no more than 90 days.  At the end of these two time frames, the Monthly Method requires large employers to offer coverage to any employee for any month in which that employee works 130 hours.  In practice, this will prove challenging because at the beginning of the month an employer probably does not know how many hours the employee will work and at the end of the month once the employer has made the determination, it is too late to offer the employee coverage.  For these reasons, many employers are considering using the Look-Back Method despite the complexities and record keeping requirements associated with that method.

Under the Look-Back Method, full-time employees must be offered coverage within 90 days of eligibility (usually from date-of-hire).  Employers may treat seasonal, variable, and part-time employees differently.  The Look-Back Method requires employers to track employees’ hours of service over a measurement period up to year (12 months).  During that year the employer determines if the employee (seasonal, variable or part-time) in fact worked full-time on average during the year.  If so, the employer must treat the employee as full-time during a subsequent stability period that is at least as long as the employee’s measurement period (but in no event shorter than six months).  This stability period must start after the measurement period, but an employer may impose a brief waiting period between the two periods.

Ag employers that have seasonal employees (who work six months or less), variable hour employees (who average less than 30 hours of service per week during an initial measurement period), and part-time employees (who average less than 30 hours of service per week during an initial measurement period but aren’t seasonal or variable) will be able to measure these employees’ hours of service over longer time periods than those available under the Monthly Method to determine coverage eligibility.

There is an important distinction between variable hour and part-time employees, which is that an employer may not assume that a variable hour employee is in a temporary or high turnover position and may leave before completing an entire measurement period (i.e. the full year).  The purpose is to prevent employers from over categorizing employees as variable who should be treated as full-time.  If an employer has hired employees to work longer than six months and at least 30 hours per week they must assume the employee will continue to work through an entire measurement period.

The IRS just recently announced the part-time employee definition and may have defined it too broadly.  Employers can assume non-seasonal employees (working longer than six months) who work on average at least 30 hours of service per week for a few months and then terminate can be considered “part-time” where an employer uses a year-long (12 month) measurement period.  This “overbroad” definition, if it isn’t shored up, will allow employers to categorize employees as part-time and measure them over 12 months rather than offering coverage sooner.

The primary benefit of the Look-Back Method is that an employer is allowed to measure employees that are not easily determined to be full-time (e.g. hired to be full-time from the beginning, working at least 30 hours per week on average).  During the determining measurement period an employer is not required to offer coverage and is not subject to mandate penalties even where these individuals go to a health insurance exchange and receive subsidized coverage.

But there’s a catch with the Look-Back Method.  An employer must memorialize and document the use of this method (incorporating the adopted rules and measurement periods into policies, procedures and associated documentation) and accurately track each hour of service worked (or its equivalent) in order to justify its coverage or lack of coverage for each seasonal, variable hour or part-time employee.  Doing so will require additional administration and likely technology implementation either integrated with payroll vendors or as an add-on to current payroll systems.

We recommend that any employer seeking to implement the Look-Back Method speak with a knowledgeable consultant about the method’s requirements and be aware that the employee hours tracking obligation is mandatory and must be properly addressed.

For more information about this article or if you have other questions about health care reform contact our Health Care Reform team today at or 800-333-4WGA. Write to Dear Jon at

For more information and resources on Health Care Reform, visit

WG Staff Contact

Jonathan Alexander
Vice President & PCMI Compliance

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