ACA PAY OR PLAY – CALENDAR YEAR VS. PLAN YEAR AND ALL THOSE PERIODS… (Part 4 ACA Series)

If you’ve been reading anything about the ACA regulations you’ve likely stumbled across the terms measurement (or look back) period, administrative period, and stability (or compliance) period. For the most part, the rules surrounding these periods are complicated, technical, and frankly-clear as mud. Figuring out what these periods mean to you will define the “whens” of your employer shared responsibility.

When is your health plan anniversary/renewal date? Do you renew your plans for the calendar year, January 1? Do you renew your plans on a fiscal year (e.g., July 1)? Do you renew on some other cycle? The plan year is generally specified in your plan’s summary plan description or on Form 5500 for plans that file them. That plan renewal date is the beginning of your stability period.

The stability period is the period you must offer coverage to full-time employees who qualified as full-time employees during the measurement period. This is regardless of the number of hours actually worked by the full-time employee during the stability period—coverage is locked in during the stability period. As part of the final regulations released in February 2014, employers with plan years that do not start on January 1 will be able to begin compliance with the employer mandate at the start of their plan years in 2015 rather than on January 1, 2015. The common confusion here is generally caused by the reporting requirement—the required reporting is for the calendar year regardless of when your stability period is. One of your compliance tasks is to identify your 12-month stability period for your ongoing employees based on your plan year.

Immediately prior to your stability period is a 30 to 90-day window called the administrative period. This is the period to test and analyze the data from the measurement period. Analyze those results and determine the strategy for your stability period (e.g., offer coverage to and enroll eligible employees, decide to accept any compliance penalties, etc.). The administrative period may not be shorter than 30 days and may not exceed 90 days. As long as the administrative period falls within those guidelines you may define an administrative period at your discretion.

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The first period chronologically is the measurement period. This is the period of time used to collect and track all the data you need for compliance. This is also the time to determine which employees are full-time. During this, the initial measurement period, you would want to put any systems in place to manage compliance. You, the employer, determine the measurement period. Due to the transitional rules in place, the measurement period cannot be less than six months for the first year (relating to the stability period that begins in 2015). Although in many cases, it will make practical sense to use a 12-month stability period. Your measurement period must begin no later than July 1, 2014.

If your stability period begins January 1, 2015 and you have a 90 day administrative period in front of that (October-December 2014) then your 6-month measurement period would begin April 2014. If you were using a 12-month measurement period, that would have started October 2013. As you can see, the clock is ticking…all the more reason to act now.

Also note that the measurement period as discussed refers to determining the status of your ongoing full-time employees. New hires, variable hour, and seasonal employees may all have different measurement periods.

Are you ready? Next week we’ll summarize the data needed for both testing and reporting.