2024 Pay or Play Affordability Percentage

Look Back Method and COVID-19

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer affordable, minimum value health coverage to their full-time employees or possibly pay a penalty. The evolving coronavirus crisis has raised questions on how employers should determine what a full-time employee is during periods of layoff, furlough, and COVID-19 related phases of paid and unpaid leave.

ALEs can use one of two methods to determine whether employees are full time under the employer shared responsibility rules:

  • Monthly measurement method — This method determines full-time status for each calendar month based on the employee’s hours of service in that month.
  • Look-back measurement method — This method determines full-time status for a longer period based on average hours of service during a prior period.

Federal agencies have not issued any guidance regarding the ACA’s employer shared responsibility rules in light of the COVID-19 outbreak. As a result, the general rules for determining employee status apply.

Look-back Measurement Method

Under the look-back measurement method, full-time employee status in a stability period is based on hours of service in the prior applicable measurement period, regardless of whether the employee experiences a leave of absence or reduced hours of service.  

To determine an employee’s hours of service, an employer must count:

  • Each hour for which the employee is paid or entitled to payment for the performance of duties for the employer; and
  • Each hour for which an employee is paid or entitled to payment on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity, layoff, jury duty, military leave or leave of absence.

All periods of paid leave must be taken into account; there is no limit on the hours of service that must be credited.

In Cases of Special Unpaid Leave

Employer mandated regulations include a method for averaging hours when measurement periods include special unpaid leave, such as leave under the Family and Medical Leave Act (FMLA).

Under this method, the ALE either:

  • Determines the average hours of service per week for the employee excluding the special unpaid leave period, and uses that average for the entire measurement period; or
  • Treats employees as being credited with hours of service for special unpaid leave at a rate equal to the average weekly rate of employee hours of service during the period that is not special unpaid leave.

For more information and how to treat rehired and returning employees, click here.

Questions? Contact the Creative Benefits Team at 866-306-0200 or solutions@creativebenefitsinc.com.