Thursday, March 12, 2015

Standard and Initial Measurement and Stability Periods Under the ACA

By now, most employers are familiar with standard measurement and stability periods for ongoing employees under the ACA.  A standard measurement period is a period from three to twelve months in length selected by the employer that is used to determine whether a variable hour employee (an employee with respect to whom full-time employee status has not been determined) is a full-time employee or not.  The standard stability period that follows is a period of the same length as the standard measurement period during which insurance coverage must be offered or may be withheld from the employee, depending on the results of the measurement period analysis.

But employers are not as familiar with the application of initial measurement and stability periods for employees who are hired during the standard measurement period.  Let us say, for example, that an employer is a large employer under the ACA but qualifies for the transition exception because it employs 50-99 full-time equivalent (fte) employees.  Let us assume further that the employer has an insurance plan year that corresponds with its fiscal year beginning May 1, 2015 and ending April 30, 2016.  The employer establishes standard measurement and stability periods coinciding with its fiscal year, so that variable hour employees are measured for insurance eligibility during the standard measurement period beginning May 1, 2015 and are determined to be eligible or ineligible for insurance coverage for the standard stability period beginning May 1, 2016.

But assume that the employer hires a variable hour employee named Charlie on September 16, 2015.  He cannot be measured according to the standard measurement period because that period is already underway.  So Charlie is given his own measurement period, called an initial measurement period, that is the same length as the standard measurement period and that begins on the first day of the month following his date of hire, or October 1, 2015, and ends on September 30, 2016.  Based on the data obtained during the initial measurement period, Charlie is found to be a full-time employee.  He must be offered insurance coverage for an initial stability period beginning October 1, 2016 and ending on September 30, 2017, and his insurance coverage then must be continued for the balance of the standard measurement period that ends on April 30, 2018.  Charlie is also measured for full-time status during that standard measurement period, and the employer’s obligation to offer Charlie insurance coverage during the standard stability period that begins May 1, 2018 is then established in accordance with the determination of full-time employee status that is made by means of the 2017-2018 standard measurement period analysis.  Having been employed for one full standard measurement period and one full standard stability period, Charlie is now an ongoing employee.

It is important for employers to keep in mind the distinction between ongoing and new variable hour employees when it comes to measurement and stability periods.  It is easy to misunderstand that distinction and to fail to understand the rules relating to the transition from new employee to ongoing employee status.