Beyond 1095-C Filing: What ACA Compliance Really Requires.

For employers with variable hour, seasonal, and part-time employees, determining ACA full-time status isn't always as simple as looking at the hours worked in a single week or month.

The Affordable Care Act allows employers to use a measurement period to determine whether an employee averaged enough hours to be considered ACA full time. That determination affects much more than employee eligibility. It determines when an offer of coverage is required, influences the information reported on Forms 1094 C and 1095 C, and plays an important role in demonstrating compliance with the Employer Shared Responsibility provisions.

What is an ACA measurement period?

A measurement period is a defined period used to determine whether a variable hour, seasonal, or part-time employee averaged at least 30 hours of service per week, or 130 hours of service per month.

If the employee meets that threshold during the measurement period, the employee is treated as ACA full time for the entire corresponding stability period, regardless of the hours worked during that stability period, provided the employee remains employed.

The purpose of the measurement period is simple. It gives employers a consistent way to determine ACA eligibility for employees whose schedules change throughout the year.

Why does the measurement period matter?

The measurement period is where ACA eligibility is determined.

Once the measurement period ends, the employer knows whether an employee must be treated as ACA full time during the stability period. That determination starts a series of additional compliance requirements.

If the employee is ACA full time, the employer must determine whether an offer of coverage is required, when that offer should become effective, whether the coverage satisfies affordability requirements, and which codes will ultimately be reported on Form 1095 C.

One determination influences everything that follows.

Measurement periods affect more than employee eligibility.

It's common to think about Forms 1094-C and 1095-C during reporting season. Those forms don't determine whether an employee should have received an offer of coverage. They report what occurred throughout the year.

The information reported to the IRS reflects whether an employee was ACA full time, whether an offer of coverage was made, which affordability Safe Harbor applied, and the information used to evaluate an employer's compliance with the Employer Shared Responsibility provisions.

That process begins with the measurement period.

ACA compliance doesn't stop after the measurement period.

The measurement period is only one part of the process.

Throughout the year, employers are also monitoring employee hours, reviewing new hires and rehires, evaluating employment status changes, identifying newly eligible employees, documenting offers of coverage, and maintaining the information required for IRS reporting.

Each activity builds on the one before it. A missed eligibility determination can result in a missed offer of coverage. A missed offer can affect the information reported to the IRS and an employer's potential exposure to Employer Shared Responsibility penalties.

Bringing it all together

Measurement periods aren't simply an ACA calculation. They are the foundation for determining which employees must be offered coverage under the Affordable Care Act.

That determination affects offers of coverage, affordability reporting, Forms 1094 C and 1095 C, and an employer's ability to demonstrate compliance with the Employer Shared Responsibility provisions.

For employers with a variable hour workforce, accurately tracking employee hours and consistently monitoring measurement periods throughout the year is one of the most important parts of ACA administration.

---

Sources

Internal Revenue Service. Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act.
https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act

Internal Revenue Service. Instructions for Forms 1094 C and 1095 C.
https://www.irs.gov/forms-pubs/about-forms-1094-c-and-1095-c

Electronic Code of Federal Regulations. 26 CFR §54.4980H-3 Full-Time Employees.
https://www.ecfr.gov/current/title-26/section-54.4980H-3

Cornell Law School Legal Information Institute. 26 U.S. Code §4980H Shared Responsibility for Employers Regarding Health Coverage.
https://www.law.cornell.edu/uscode/text/26/4980H