Do we have to use the look-back method?
The short answer: no. The monthly measurement method is the other option, and you can use a different method for each permitted category of employee.
The three things to know.
Monthly Is the Alternative
Measure each calendar month. Simple when hours are steady, harder when they swing.
Look-Back Is Optional
It locks status for a stability period and suits variable hours, seasonal staff and large part-time groups.
You Can Mix
Union and non-union, salaried and hourly, and employees in different states can follow different methods.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Steady Office Team
A professional services firm has 40 salaried employees who work consistent 40-hour weeks. No one is near 30 hours.
What the Rule Produces
Monthly measurement is simple here: everyone is full-time every month. A look-back design would add periods and notices without changing any result, so the firm uses monthly measurement for this group.
Four steps to apply it.
1. List workforce groups
Describe how hours vary.
2. Compare methods
Estimate the work of each.
3. Choose per group
Use monthly or look-back.
4. Document
Record the choice.
Where it goes wrong. Adopting look-back for a group whose hours never vary.
The questions that come up next.
Which is cheaper to run?
It depends on your hours. Look-back reduces churn; monthly avoids multi-period calendars.
Can we switch later?
Yes, with transition rules and documentation.
Does look-back affect reporting?
Reporting stays month by month. Status months follow your design.
Can we use look-back for only part of the workforce?
Yes, for any permitted category.
Is one method safer?
Both are compliant when applied correctly. The better fit depends on your hours.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
How long can the measurement period be?
The short answer: three to twelve months, with start and end dates you choose.
How long must the stability period be?
The short answer: for employees found full-time, at least six consecutive calendar months and no shorter than the measurement period.
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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