An employer’s number of full-time employees is critical in determining whether the employer is an applicable large employer subject to the requirements of the Affordable Care Act (“ACA”) and for determining the Employer’s Shared Responsibility payment. An employer identifies its full-time employees based on each employee’s hours of service. An employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week, or 130 hours of service in a calendar month.

Employers can choose one of two measurement methods for determining whether an employee has sufficient hours of service to be a full-time employee. One is the monthly measurement method, under which an employer counts the employee’s hours of service for each month. The other is the look-back measurement method, under which an employer determines the status of an employee as a full-time employee during a future period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period). The look-back measurement method is available only for purposes of determining and computing liability for an Employer Shared Responsibility payment, and not for purposes of determining whether the employer is an applicable large employer.

Because the look-back measurement method is used to determine an employee’s full-time status, it affects whether and when an employee must be offered group health plan coverage. ERISA requires that matters concerning eligibility for coverage must be disclosed to employees in the summary plan description (“SPD”). Plan sponsors should review their SPDs to determine compliance. Where there is an existing SPD, an amendment explaining the look-back measurement method and other ACA requirements can be added in a Summary of Material Modifications (SMM).

What’s next? We are available to assist in a review of your SPD and to prepare an SMM at your request.