Using Look-Back for Large Employer Status
Large employer status is a monthly count of full-time employees plus full-time equivalents. The look-back result cannot replace it.
The three things to know.
Two Different Questions
Who is a full-time employee for penalty purposes can use look-back. Whether you are a large employer is counted each month using hours of service.
What the Count Uses
For each month, employees with at least 130 hours are full-time. Part-time hours convert to equivalents at 120 hours each.
The Fix
Run the monthly count for the prior calendar year every year, whatever method you use for individuals.
Sources: 26 CFR § 54.4980H-2; 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Company Near 50
A company with 44 full-time employees and a large part-time workforce uses look-back to classify employees and assumes it is under 50.
What the Rule Produces
The monthly count adds part-time hours as equivalents, putting the company at 52 in the prior year, so it is an applicable large employer. The look-back results do not change that.
Four steps to apply it.
1. Run both
Do the monthly count and the look-back.
2. Keep them separate
Use each for its purpose.
3. Check each year
Re-run the count annually.
4. Plan ahead
Prepare for reporting.
Where it goes wrong. Assuming a low full-time headcount means the mandate does not apply.
The questions that come up next.
Does the monthly count use the same hours records?
Yes, the same hours of service data, but with the monthly standard.
What if the look-back status and the monthly count disagree?
They answer different questions. Keep both and apply each where it belongs.
Who do we aggregate with?
Commonly owned companies are generally treated as one employer.
When is the count made?
For the prior calendar year, to decide the current year.
Do related companies combine?
Commonly owned companies generally do.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Hours Living in Three Systems
Payroll, scheduling and the benefits platform often disagree, and the regulations require hours from records of hours worked and paid.
Step 1: Decide Your Categories
Choose whether union, salaried, hourly and state-based groups get different treatment, and which method each group uses.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
Talk it through with someone who runs this every year.
We help you choose the design, document it and reconcile the hours before the numbers reach your reporting.
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