Under the ACA’s Employer Shared Responsibility rules, Applicable Large Employers (ALEs) must determine which employees are considered full-time (averaging at least 30 hours per week or 130 hours per month) to decide who must be offered coverage.
Employers may use either the Monthly Measurement Method or the Look-Back Measurement Method to make this determination. These methods are designed to provide structure and consistency – particularly for workforces with variable schedules, part-time employees, or seasonal staff.
Monthly Measurement Method – Standard Employees
Under the Monthly Measurement Method, full-time status is determined month by month, based on actual hours worked in that calendar month.
- If an employee works 130 or more hours in a month, they must be treated as full-time and offered coverage for that month.
- If they work less than 130 hours, the employer is not obligated to offer coverage for that month.
This method works best for employers with stable, predictable workforces (e.g., salaried employees or hourly employees with consistent schedules).
However, it can create fluctuations in eligibility for variable hour employees, requiring frequent adds and terminations from coverage — which can be administratively burdensome.
Look-Back Measurement Method – Variable Hour Employees
The Look-Back Measurement Method is designed for employers with variable hour, part-time, or seasonal employees whose schedules may fluctuate significantly. It allows employers to measure hours over a longer period to determine eligibility, then lock in that status for a future period.
This method involves three key components:
- Measurement Period: Employers track employee hours over a defined period between 3 and 12 months to determine whether the employee averaged 130+ hours per month.
- The period must be applied uniformly within each employee category (e.g., hourly, salaried, collectively bargained).
- Many employers use a 12-month measurement period aligned with the calendar or plan year for simplicity.
- Example – Summer Lifeguard: A city hires a lifeguard who works 40 hours per week during June, July, and August, but no hours the rest of the year. Over a 12-month measurement period (January–December), their total hours are averaged across all 12 months. Because they only work full-time for three months, their average falls below 130 hours/month, so they are not considered full-time for ACA purposes in the subsequent stability period.
- Stability Period: Follows the measurement period. During this time, an employee’s full-time or part-time status is locked in, regardless of fluctuations in their actual hours worked.
- If the employee qualified as full-time during the measurement period, they must be treated as full-time and offered coverage for the entire stability period — even if their hours drop.
- The stability period must be at least as long as the measurement period, and no less than 6 months.
- If the employee was not full-time during measurement, the employer is not required to offer coverage during stability, even if the employee later increases their hours.
- Administrative Period: Employers may use a brief administrative period between the measurement and stability periods to:
- Review hours worked,
- Determine eligibility,
- Offer coverage and enroll newly eligible employees.
- The administrative period cannot exceed 90 days and must not create a gap in coverage.
Break-in-Service Rules
Determine whether a returning employee should be treated as a new employee (starting a new measurement period) or a continuing employee (retaining their previous status).
- If an employee has no hours of service for at least 13 consecutive weeks, the employer may treat them as a new hire upon return.
- For educational organizations, the break period is 26 weeks.
- Alternatively, employers may use the Rule of Parity: if the employee’s break in service is at least 4 weeks and longer than their immediately preceding period of employment, they may also be treated as a new hire.
- If neither of these conditions is met, the employee retains their previous full-time status through the stability period.
These rules are especially important for industries with seasonal or cyclical workforces, ensuring employees aren’t continuously classified as full-time after long breaks unless the rules require it.
Seasonal Employees
The ACA’s Employer Shared Responsibility rules include specific provisions for seasonal employees, who typically work full-time hours for a short period (e.g., summer lifeguards, harvest workers, retail holiday staff).
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Seasonal employees are not automatically considered full-time simply because they work 30+ hours during their active season.
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Under the Look-Back Measurement Method, an employee’s hours are averaged over the entire measurement period (e.g., 12 months). Seasonal employees who work full-time for only a few months will typically average below 130 hours/month, and therefore do not qualify as full-time for the subsequent stability period.
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Seasonal employees may also be excluded from coverage during their initial measurement period if the employer reasonably expects the seasonal period to last less than six months.
These rules give employers flexibility to manage short-term or cyclical workforces without triggering coverage offers for temporary seasonal hires, while still maintaining compliance.
Choosing the Right Method
Employers may apply different measurement methods to different reasonable categories of employees, such as:
- Hourly vs. salaried
- Collectively bargained vs. non-bargained
- Different states, regions, or divisions
The method must be applied consistently within each category and documented clearly in plan materials.
- Monthly Method works best for predictable, stable workforces.
- Look-Back Method offers flexibility and stability for variable hour and seasonal workforces.
Documentation in ERISA Plan Materials
Employers using the Look-Back Measurement Method must clearly describe their measurement, stability, and administrative periods – as well as their break-in-service rules – in their ERISA plan materials.
This information is typically included in the Summary Plan Description (SPD) or other formal plan documents to ensure employees understand how eligibility for health coverage is determined. Clear documentation also strengthens compliance in the event of an audit or employee inquiry.
Key Takeaway
Choosing and applying the appropriate measurement method is critical for ACA compliance. The Look-Back Method provides stability for variable hour employees, while the Monthly Method is simpler for stable groups. Employers should define their measurement periods clearly, keep accurate records, and apply break-in-service rules correctly to avoid penalties.