The Compliance Rundown

Practical solutions for human resource & benefits professionals to employee benefit compliance issues.

Affordable Care Act (ACA) Measurement Methods

The ACA has established rules on how to measure an employee’s hours to ensure an employee isn’t denied benefits based on a job title or classification of “part time” when in actuality they are working what the ACA considers full time (i.e. 30 hours a week or 130 hours a month). Part of these rules also includes when an employee must be offered benefits.

Unfortunately, the measurement rules may be confusing, and often it’s easiest to understand the concept with an illustration (above). First, a few definitions:

• Standard measurement period (SMP): a period of time (recommended is 12 months) for counting hours of service to determine full-time status for all ongoing employees
• Ongoing employee: an employee who has been employed for at least one standard measurement period
• Administrative period: allows time for enrollment and disenrollment, typically it’s 1 or 2 months
• Standard Stability Period: when coverage must be provided if the employee averages full-time hours during the prior standard measurement period, this timeframe coincides with an employer’s plan year
• Initial measurement period (IMP): lasts between three and 12 consecutive months, as chosen by the employer (we recommend 12), it begins on the first day of the calendar month following the employee’s start date
• Initial stability period: when coverage must be provided if the employee averages full-time hours during their initial measurement period. If an employee does not average 30 hours/week during the IMP, the stability period cannot be more than one month longer than the IMP, typically this is the same length as the IMP

The above illustration is what these periods look like assuming a 1/1 plan year.

When an employee is hired as PT, their initial measurement period (IMP) starts the first day of the month after they were hired (e.g., date of hire 3/15/16, IMP starts 4/1/2016) and may last for up to 12 months (this diagram 11 months is used). During the IMP (e.g., 4/1/16 – 2/28/17) their hours are being tracked. At the end of the IMP (e.g., 2/28/2017), if the employee averaged 30 hours a week (or 130 hours a month) they must be offered benefits by the first day of their 13th month of employment which is the first date of their initial stability period (e.g., 5/1/2017). The employee also then must continue to be offered coverage for their entire initial stability period regardless of the number of hours they are working.

These employees are also being measured during the SMP (e.g., 11/1/2016 – 10/31/2017) being used for all ongoing employees. If during the SMP they measure FT, the employee is eligible for benefits for the duration of the standard stability period (e.g., 1/1/2018 -12/31/2018), which means at the end of their IMP (e.g., 2/28/2017), benefits continue until the end of the standard stability period (12/31/2018). So, in the diagram above, on 4/30/2018 when the initial stability period ends, if from 11/1/16 – 10/31/17 (the standard measurement period) the employee measured full time, their benefits would continue until 12/31/2018. If, however, on 4/30/2018 the employee did not measure full time during the SMP (11/1/16 – 10/31/17) the employee would no longer be eligible for coverage.

The other method that is available to use is the monthly measurement method, which means each month an employer determines whether an employee is/is not eligible for benefits based on the # of hours they worked the previous month and they would enroll/term accordingly monthly. Not a method that makes administrative sense for an hourly employee with fluctuating hours.

“The Five Ws, and One H of Affordable Care Act (ACA) Measurement Methods.” Alera Group, 23 Dec. 2020, aleragroup.com/insights/the-five-ws-and-one-h-of-affordable-care-act-aca-measurement-methods-102120/.