By: Matt Ingold

Print this Page

August 8th, 2016

How to Determine Your Historical Measurement Period for ACA Software Implementation

Affordable Care Act | HR Best Practices | HR Technology

By now most employers and HR professionals are well aware of the data required for Affordable Care Act testing and reporting. The measurement periods continue to be a sticking point for people, particularly when they are collecting data during the process for an ACA software implementation.

In this blog, we’ll be explaining how to build historical measurement periods when implementing ACA software—specifically addressing the question, “How far back do I have to go when gathering historical employee-hours data?”

To answer this question, it’s important to know that there are two different types of measurement periods for ACA tracking: individual and standard.

The Different ACA Measurement Periods

Individual measurement periods come into effect when variable-hour employees are first hired. It begins on the first of the month following their Date-Of-Hire (DOH), culminating 12 months thereafter. For example, if Sara is expected to be a variable-hour employee and is hired on March 18th, 2016, her individual measurement period will go from April 1, 2016 to March 31, 2017. During that time, Sara’s average monthly hours will either fall above or below 130 hours.

The Standard Measurement Period is the 12 month limited non-assessment period in which fall all part-time employees who have been employed for more than 12 months. The Standard Measurement Period is tied to the employer’s open-enrollment period and health insurance renewal month. For example, an employer with a January 1, 2016 health insurance renewal date may use a 2 month Administrative Period (November and December of 2015) for identifying their full-time population, offering coverage, and updating enrollments. The 12 months prior to that Administrative Period (November 1, 2014 – October 31, 2015) will be their Company Standard Measurement Period.

ACA Software and Measurement Periods

Figure 1: Two Year Overview of Standard and Individual ACA Tracking Periods for an Employer with a January 1 Health Plan Renewal Date. The figure includes two Individual ACA Tracking Periods as an example of the individual tracking that would be required upon hiring two new employees off-cycle from an employer's Standard Measurement Period.

When implementing ACA software and answering the question “How far do I need to go back?” there are 3 different answers—each dependent on your employee makeup and how far back you want to construct your audit trail.

What are your Measurement Period Reconstruction Options?

Option 1: Building Your Current Standard Measurement Period

At a minimum, employers adopting an ACA testing and reporting software will want to upload retroactive employee hours to reconstruct their current Standard Measurement Period. This means that if the aforementioned employer with their January 1 health insurance renewal was implementing an ACA reporting software on August of 2016, they would want to upload retroactive employee hours back to November 1 of 2015. This will ensure that come October 31 of 2016 they will have hours-data for the entire 12-month Standard Measurement period.

Option 2: Building your current Individual Measurement Periods

Consider again the same company with the January 1 health insurance renewal that is implementing an ACA software in August of 2016. If they had employees that were hired in August or September of 2015, they will have individual measurement periods culminating on September 1 or October 1 in 2016 (12 month period beginning the first of the month following DOH). If they have averaged more than 130 hours per month during that time, they will be eligible for benefits 30 days following the culmination of their individual measurement period.

If this employer has high-turnover, he or she may want to go back to August 1, 2015 in order to capture those individual measurement periods that will culminate prior to the end of their Standard Measurement Period on October 31. Otherwise, they may be late in extending their coverage offer and vulnerable to an ACA penalty.

Option 3: Building the Historical Standard Measurement Period for the Current Standard Stability Period.

Consider again our example company—its Standard Stability Period (the 12-month period during which all full-time employees are offered coverage) extends from January 1, 2016 to Deember 31, 2016. All employees that were identified as full-time employees eligible for employer-sponsored health insurance under the ACA were confirmed during the employer’s previous Administrative Period (November and December of 2015).

To identify those variable-hour employees that were reclassified as full-time employees during that 2015 Administrative Period, the employer is drawing from employee-hours data collected during the Standard Measurement Period from November 1, 2014 – October 31, 2015. Collecting all of this historical information will reconstruct an audit trail justifying how the employer classified his or her employees for the 2016 Stability Period.


Figure 2: Graphical Depiction of the 3 Retroactive Measurement Period Options for an August 1, 2016 ACA Software Implementation

What are the Pros and Cons for Each Option?

Of the three options, Option 3 is the best way for an employer to fully uncover any compliance risks in the current stability period while best preparing for a possible IRS audit. Conversely, it is the most administratively burdensome in that it requires employers to gather nearly 2 years of historical employee information and hours-worked. This can extend ACA software implementation timelines and inflate the labor required to gather the information. That being said, for employers that have a large variable-hour population and high turnover, this may be the most prudent option.

Option 2 would be a good fit for those employers who are confident in the accuracy of their full-time employee population for their current Standard Stability Period, but may have high turnover and are multiple individual measurement periods to track. It may be further justified if the industry is one where there is a higher likelihood of variable-hour employees to work more than 130 hours per month. We see this often in hospitals and nursing home facilities where employees may work 60 hours in one week and 25 in the next.

Option 1 would be a good fit for employers who are confident in the accuracy of their full-time employee population for their current Standard Stability Period, and but do not foresee an individual measurement period resulting in a status change for an employee prior to the end of the Standard Measurement Period. For these employers, which will typically have lower turnover and a more stable population (or perhaps little to no variable-hour employees), like schools, professional service firms, law firms, accounting agencies, etc., the labor and effort to gather historical information beyond the current Standard Measurement Period may not be justified.

New Call-to-action

About Matt Ingold

Matt serves as Benetech's Director of Business Development. He helps employers reduce the cost of personnel management, and discover where improved talent management can give their business a competitive advantage.

  • Connect with Matt Ingold

Before you leave...


Mistakes are expensive, especially when building benefit plans.

We've outlined the 3 most common mistakes employers make when offering benefits in a quick ebook. Get your copy free when you subscribe to our blog.

Before you leave...

Mistakes are expensive, especially when building benefit plans.

We've outlined the 3 most common mistakes employers make when offering benefits in a quick ebook. Get your copy free when you subscribe to our blog.