06.26.13 |
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Employers May Use "Short" Measurement Period Under the ACA's Transition Relief

This article was originally featured in our ADP Eye on Washington update.

On January 3, 2013, the IRS published proposed rules regarding the Shared Responsibility provisions of the Affordable Care Act (ACA). These provisions apply to “applicable large employers” (generally those with 50 or more full-time and full-time equivalent employees).  The proposed rules addressed a broad array of issues that employers will need to understand in order to prepare for implementation of ACA Shared Responsibility provisions in 2014.

The proposed rules also contain several provisions that offer transition relief to employers.  For example, transition relief is available to delay the effective date of the Shared Responsibility provisions for non-calendar year group health plans that meet certain eligibility or participation requirements.  There is also transition relief available for employers participating in multiemployer group health plans.

 Another transition relief provision applies to employers that intend to utilize the “look-back” measurement method for determining full-time status for 2014.  The IRS recognizes that employers that intend to adopt a 12-month measurement period – and, in turn a 12-month stability period – may need to evaluate each employee’s hours of service as far back as October 2012 for stability periods starting January 1, 2014.  For example, an employer intending to use a stability period that runs from January 1, 2014 through December 31, 2014 – and an administrative period that runs from October 15, 2013 through December 31, 2013 – will need to apply a measurement period that runs from October 15, 2012 through October 14, 2013. 

 The IRS understands that, in certain cases, employers may not have begun tracking hours of service back in October 2012.  Therefore, solely for purposes of stability periods beginning in 2014, the transition relief permits employers to adopt a transition measurement period that is less than 12 months, but which:

o   Is at least six months long;
o   Begins no later than July 1, 2013; and
o   Ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014 (90 days being the maximum permissible administrative period).

For example, an employer with a calendar year plan could use a measurement period from April 15, 2013 through October 14, 2013 (six months), followed by an administrative period ending on December 31, 2013.  Additionally, an employer with an April 1 plan year could use a measurement period from July 1, 2013 through December 31, 2013 (six months), followed by an administrative period ending on March 31, 2014 (90 days from December 31, 2013).

However, an employer with a plan year beginning July 1, 2014 must use a measurement period that is longer than six months in order to comply with the requirement that the measurement period begin no later than July 1, 2013 and end no earlier than 90 days before the stability period.  For example, the employer could have a 10-month measurement period from June 15, 2013 through April 14, 2014, followed by an administrative period from April 15, 2014 through June 30, 2014.

Note that this transition relief is solely for the application of a stability period beginning in 2014 through the end of that stability period (including any portion of the stability period falling in 2015). An employer that intends to avail itself of this transition relief should be prepared to begin tracking employees’ hours of service no later than July 1, 2013.

Learn more about ADP solutions to help employers stabilize their approach to ACA compliance.


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