Compliance Q&A: Look-Back Measurement Method and Reduction of Hours

The IRS provides two ways that Applicable Large Employers (ALEs) can determine whether employees are considered “full-time” for purposes of the Affordable Care Act (ACA)’s employer shared responsibility (ESR) mandate: the monthly measurement method and the look-back measurement method. While the monthly measurement method is the default, many employers prefer to utilize the look-back measurement method to avoid the administrative burden of determining full-time status on a monthly basis. What should happen when an employer using the look-back measurement method has an full-time employee experience a change in status to part-time? The answer can vary based on factors such as whether this is a new employee or one who has completed a standard measurement period, and how the employer’s ACA eligibility policy is drafted.