Smart Benefits: New IRS Guidance on FTE Look-Back Period

Smart Benefits: New IRS Guidance on FTE Look-Back Period

The IRS recently issued Notice 2014-49 related to the Affordable Care Act’s shared responsibility provision that proposes an approach for the application of the look-back measurement method used to determine if an employee is a full-time employee in certain situations.

Who Does the Method Apply To?

The look-back measurement method generally involves using an employee’s average hours of service per week during a period to determine if an employee is a full-time employee during a subsequent period.

In Notice 2014-49, the IRS proposes an approach to the application of the look-back measurement method when the measurement period changes in one of two situations:

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-When the employee transfers within the same applicable large employer or within the same applicable large employer member from a position to which one measurement period applies to a position to which a different measurement period applies.

-When the employer modifies the measurement period applicable to employees in a permissible category.

What’s Different?

In the two situations described above, under the proposed rule, for an employee who has been employed for a full measurement period at the time of the transfer (and will either be considered a full-time employee or non-full-time employee for the stability period in that measurement period), the employee retains his or her status through the end of the associated stability period. For an employee who is not in a stability period (or administrative period) at the time of transfer, the employee’s status is determined using the measurement period that applies to the second position, but including hours of service in the first position in applying that measurement period.  

Can it be Used Now?

Until further guidance is issued (and at least through the end of calendar year 2016), employers can rely on this notice.

Comments on the rules proposed in the notice can be submitted to the IRS until December 29, 2014.  

Amy Gallagher has over 21 years of healthcare industry experience guiding employers and employees. As Vice President at Cornerstone Group, she advises large employers on all aspects of healthcare reform, benefit solutions, cost-containment strategies and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, and is often quoted by national publications on the subject matter. Locally, Amy is a member of SHRM-RI, the Rhode Island Business Group on Health, and the Rhode Island Business Healthcare Advisory Council.